Suppose Two Firms Have the Same Amount of Assets, Pay

question 48

True/False

Suppose two firms have the same amount of assets, pay the same interest rate on their debt, have the same basic earning power (BEP), and have the same tax rate. However, one firm has a higher debt ratio. If BEP is greater than the interest rate on debt, the firm with the higher debt ratio will also have a higher rate of return on common equity.

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Definitions:

Health Practices

Behaviors and activities conducted to maintain or improve health, such as exercise, healthy eating, and regular medical check-ups.

Extrusion Reflex

A reflex in infants where they use their tongue to push out solids or foods they are not yet ready to swallow.

Solid Foods

Food items that are not liquid, introduced to infants' diets around 6 months of age to meet nutritional needs beyond breastfeeding or formula.