The following information is available for the Maine Company and the Iowa Company.

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 preceding ratios support the concept of financial leverage? Explain.

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Total assets Total liabilities Stockholders' equity Net income Maine Co. $695,000 417,000 278,000 41,000 lowa Co. $151,000 106,000 45,000 10,000