At the end of 2013, the following information is available for ABC Company and XYZ Company: 
Required:
1) For each company, calculate the debt to assets ratio and the return on equity ratio.
2) For each company, calculate the return on assets ratio.
3) Which company had a greater level of debt risk? Why?
4) What is financial leverage? Which company is using financial leverage more successfully?
Definitions:
Short-Run Instability
A situation in economics where variables such as output, employment, and prices are subject to frequent fluctuations over a short period.
Agriculture
The activity of farming the land, cultivating plants, and breeding animals for human needs and sustenance.
Causes
The reasons or motives behind certain events, actions, or outcomes, identifying why something happens.
Bumper Crop
An unusually large harvest of crops in a particular year.
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