Firm a and Firm B Have the Same Total Assets

question 120

Multiple Choice

Firm A and Firm B have the same total assets, ROA and profit margin (greater than 0) . However, Firm B has a higher debt ratio and interest expense than Firm A. Which of the following statements is correct?

• A) Firm B must have a higher ROE than Firm A.
• B) Firm B must have a higher capital intensity ratio than Firm A.
• C) Firm B must have a higher fixed asset turnover than Firm A.
• D) Firm B must have a lower ACP than Firm A.

---

Definitions:

Excise Tax

A tax imposed on specific goods, such as tobacco and alcohol, typically gauged per unit.

Downward-Sloping Demand

The typical relationship between price and quantity demanded, indicating that as price decreases, demand usually increases.

Upward-Sloping Supply

A supply curve that shows an increase in the quantity of a good or service supplied as its price rises, reflecting direct relationship between price and quantity supplied.

Elasticity Of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of consumers to price changes.