Pg 363 answer to 5 in cfai text is fsa book. Company a has higher financial leverage ratio than b. Therefore A is riskier than b. If A had a higher asset/ equity ratio than b then doesn’t that mean it has less debt as a percentage of it’s equity? I don’t understand why having more assets to equity is riskier than less assets to equity.
Higher assets = more liabilities compared to equity. A = L + E A / E = L
annnnnddd, thank you for making me feel like a schmuck…