Final answer:
Based on the debt ratios provided, Company B has less financial leverage compared to Company A, as it has a lower debt ratio, indicating a smaller proportion of its assets is financed by debt.
Therefore, the correct answer is: option b) Company A has less financial leverage.
Step-by-step explanation:
The debt ratio is calculated as total liabilities divided by total assets, representing the proportion of a company's assets that are financed by debt.
A lower debt ratio suggests that the company has less leverage and is using less debt financing in comparison to its assets.
Company A has a debt ratio of 0.31, and Company B has a debt ratio of 0.21. Given this information, we can conclude that Company B has less financial leverage than Company A.
It indicates that Company B is relying less on borrowed funds in proportion to its assets compared to Company A.
Therefore, choice (b) is correct: 'Company B has less financial leverage.' The other options provided in the question do not directly relate to the information given about the debt ratios.