Two Companies, a and B, Both Have $1 Million in Assets

question 42

Multiple Choice

Two companies, A and B, both have $1 million in assets, earnings before interest and taxes (EBIT) of $160,000, and the same tax rate. Company A is all equity financed, and Company B is 50% debt financed and 50% equity financed. If Company B's pretax cost of debt is 8%, then Company A will have a ROA that is _____ and a ROE that is _____ than Company B's. $$\begin{array} { l c c } & \underline { \text { ROA } } & \underline { \text { ROE } } \\\text { A) } & \text { lower } & \text { higher } \\\text { B) } & \text { higher } & \text { higher } \\\text { C) } & \text { lower } & \text { lower } \\\text { D) } & \text { higher } & \text { lower }\end{array}$$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

Understand various replenishment systems within the supply chain and their specific functions.

Comprehend the ownership and flow of inventory in different supply chain models.

Identify key aspects and benefits of successful collaboration in supply chains.

Recognize strategies to solve coordination problems within supply chains.

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Definitions:

Left Eye

Refers to the eye on the left side of the body, which, along with the right eye, provides part of the visual field and depth perception.

Perceptual Constancy

The accurate perception of objects as stable or unchanged despite changes in the sensory patterns they produce.

Retinal Image

The projection of visual stimuli onto the retina, the light-sensitive layer of tissue at the back of the eye, where it is converted into neural signals.

Unchanging

Remaining the same over time; not undergoing any transformation, variation, or development.