Question
Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of
Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd. However, Company HD has a higher debt ratio and thus more interest expense than Company LD. Which of the following statements is CORRECT?
Company HD has a lower ROA than Company LD.
Company HD has a lower ROE than Company LD.
The two companies have the same ROA.
Firm L has a higher EBIT than Firm U.
The two companies have the same times interest earned (TIE) ratio.
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Quantitative Analysis For Management
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Hale
14th Edition
0137943601, 9780137943609
