Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.
A. Lu Lu's has a higher risk from its financial leverage.
B. Higher financial leverage involves lower risk.
C. Able's Bakery's financial leverage is greater than Lu Lu's.
D. Able's Bakery's financial leverage is less than Lu Lu's.
E. Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's.
Answer: C
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