Companies HD and LD Have Identical Tax Rates, Total Assets

question 20

Multiple Choice

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?

• A) Company HD has a higher net income than Company LD.
• B) Company HD has a lower ROA than Company LD.
• C) Company HD has a lower ROE than Company LD.
• D) The two companies have the same ROA.
• E) The two companies have the same ROE.

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Definitions:

Sony Flat-Panel Television

A type of television produced by Sony, featuring a thin display technology.

AIDA Strategy

A marketing model that outlines the process of attracting customer attention, interests, desire, and prompting action.

Gaining Attention

The act of drawing someone's focus or interest towards something, typically at the beginning of a speech or presentation.

Building Interest

Developing or increasing someone's attention, enthusiasm, or engagement with a particular topic or activity.