The financial statements of Flathead Lake Manufacturing Company are shown below.


Note: The common shares are trading in the stock market for $15 per share.
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's compound leverage ratio is ________. (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.)

A) 1.5
B) 2
C) 2.5
D) 3

Compound Leverage Ratio

A measure that assesses the impact of financial leverage on a company's potential returns, taking into account both debt and equity levels.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period of time, revealing profit or loss.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the company's financial position.