At the end of 2012, the following information is available for City Cinema and Feature Flicks.

Required

a. For each company, compute the debt to assets ratio and the return on equity ratio.

b. Determine what percentage of each company's assets were financed by the owners.

c. Which company has the greatest level of financial risk?

d. Based on profitability alone, which company performed better?

e. Do the above ratios support the concept of financial leverage? Explain.

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City Cinema Feature Flicks Total assets $219,000 $981,000 Total liabilities 136,000 529,000 Stockholders' equity 83,000 452,000 Net income 18,000 69,000