You Have Collected the Following Information Regarding Companies C and D

question 61

Multiple Choice

You have collected the following information regarding Companies C and D: • The two companies have the same total assets.
• The two companies have the same operating income (EBIT) • The two companies have the same tax rate.
• Company C has a higher debt ratio and a higher interest expense than Company D.
• Company C has a lower profit margin than Company D.
Based on this information, which of the following statements is most correct?

• A) Company C must have a higher level of sales.
• B) Company C must have a lower ROE.
• C) Company C must have a higher times-interest-earned (TIE) ratio.
• D) Company C must have a lower ROA.
• E) Company C must have a higher basic earning power (BEP) ratio.

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Definitions:

State Power

The ability of a government to exert control and enforce laws over its territory and population.

Guest Worker

A person who is permitted to reside in a foreign country for the purpose of employment, usually temporarily.

Economic Restructuring

The changes in the structure of an economy, affecting its sectors or industries, often driven by technological advancements or globalization.

Illegal Immigration

The act of moving into or living in a foreign country without the legal permission of the country's government.