Sunny Co has a debt-to-equity ratio of 1.00, compared to the industry average of 0.80. Its competitor Carter Co., however, has a debt-to-equity ratio of 1.50. Based on what debt-to-equity ratios imply, which of the following statements is true?
O Carter Co.'s creditors face lesser risk than the average financial risk in the industry.
O Sunny Co.'s shareholders expect magnified returns but higher risk as compared to Carter Co.
O Carter Co. has greater financial risk as compared to Sunny Co. and to the average financial risk in the industry.
O Carter Co. has higher creditworthiness as compared to Sunny Co.