Companies a and B Each Have the Same Level of Total

question 16

Multiple Choice

Companies A and B each have the same level of total assets, the same tax rate, and the same earnings before interest and taxes (EBIT) . Company A, however, has a higher debt ratio. Which of the following statements is most correct?

• A) Company A has a lower return on assets (ROA).
• B) Company A has a lower basic earning power (BEP).
• C) Company A has a lower times interest earned (TIE) ratio.
• D) Answers a and c are correct.
• E) All of the answers above are correct.

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Definitions:

Chain of Command

The formal line of authority and communication in an organization, showing how orders are passed from top-level management to every level of personnel in the hierarchy.

Unity of Command

A principle in organizational management stating that each employee should receive orders from, and report to, only one superior to avoid confusion and conflict.

Preset Sequences

are predetermined arrangements or patterns of actions, steps, or instructions designed to achieve a specific outcome or execute a procedure.

Managers

Individuals in an organization responsible for directing and overseeing the work of other members toward achieving organizational goals.