Response to the following problem:
At the end of the current year, the following information is available for both West Elm Company and East Park Company.
West Elm Company East Park Company
Total assets . . . . . . . . . . $396,396 $1,650,000
Total liabilities . . . . . . . . 178,596 1,237,500
Total equity . . . . . . . . . . 217,800 412,500
Required:
1. Compute the debt-to-equity ratios for both companies.
2. Comment on your results and discuss what they imply about the relative riskiness of these companies.