Company a and Company B Have the Same Total Assets

question 21

Multiple Choice

Company A and Company B have the same total assets, operating income (EBIT) , tax rate, and business risk. Company A, however, has a much higher debt ratio than Company B. Company A's basic earning power (BEP) exceeds its cost of debt financing (rd) . Which of the following statements is most correct?

• A) Company A has a higher return on assets (ROA) than Company B.
• B) Company A has a higher times interest earned (TIE) ratio than Company B.
• C) Company A has a higher return on equity (ROE) than Company B, and its risk, as measured by the standard deviation of ROE, is also higher than Company B's.
• D) Statements b and c are correct.
• E) All of the statements above are correct.

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Definitions:

Infant Attachment

The emotional bond that develops between a child and a caregiver, critical to the child's emotional and social growth.

Adult Love

Complex emotional and interpersonal experiences characteristic of romantic relationships in adulthood, encompassing elements such as intimacy, commitment, and passion.

Passion

Passion refers to a strong, intense emotion or enthusiasm for something, such as a hobby, activity, or goal.

Triangular Theory

proposes that love is composed of three components: intimacy, passion, and commitment, each varying in degree across different relationships.