Companies HD and LD Have Identical Amounts of Assets, Investor-Supplied

question 34

Multiple Choice

Companies HD and LD have identical amounts of assets, investor-supplied capital, operating income Which of the following statements is CORRECT?

• A) Company HD has a higher return on assets (ROA) than Company LD.
• B) Company HD has a higher times interest earned (TIE) ratio than Company LD.
• C) Company HD has a higher return on equity (ROE) than Company LD, and its risk as measured by the standard deviation of ROE is also higher than LD's.
• D) The two companies have the same ROE.
• E) Company HD's ROE would be higher if it had no debt.

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Definitions:

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The payment rate at which the labor needed by businesses equals the labor provided by individuals.

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