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Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt.
Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt. However, company HD has a higher debt ratio. Which of the following statements is CORRECT?
a.Given this information, LD must have the higher ROE.
b.Company LD has a higher ROA.
c.Company HD has a higher ROA.
d.If the interest rate the companies pay on their debt is more than their ROA, then Company HD will have the higher ROE.
e.If the interest rate the companies pay on their debt is less than their ROA, then Company HD will have the higher ROE.
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Risk Management And Financial Institution
Authors: John C. Hull
2nd Edition
0136102956, 9780136102953
