Response to the following questions:
1. Consider two firms, each with a return on assets of 10%. Firm X has a return on equity of 15%, and Y has a return on equity of 20%. Which firm uses more financial leverage? Explain.
2. Suppose a company has a return on equity of 20%. If this company has an asset turnover of 4 times and a profit margin of 5%, what is its debt-to-assets ratio?