An Analyst Has Obtained the Following Information Regarding Two Companies

question 2

Multiple Choice

An analyst has obtained the following information regarding two companies, Company X and Company Y: • Company X and Company Y have the same total assets.
• Company X has a higher interest expense than Company Y.
• Company X has a lower operating income (EBIT) • Company X and Company Y have the same return on equity (ROE) • Company X and Company Y have the same total assets turnover (TATO) • Company X and Company Y have the same tax rate.
Based on this information, which of the following statements is most correct?

• A) Company X has a higher times-interest-earned (TIE) ratio.
• B) Company X and Company Y have the same debt ratio.
• C) Company X has a higher return on assets (ROA).
• D) Company X has a lower profit margin.
• E) Company X has a higher basic earning power (BEP) ratio.

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Definitions:

Middle-aged White Men

Males of Caucasian ethnicity typically in the age range of 45 to 65 years.

Intrinsic Motivator

An internal drive that compels individuals to act based on inner rewards, passion, or interest, without external incentives.

Intellectual Ability

The capacity to think, learn, and make sense of the world through mental processes, reasoning, and problem-solving.

Peer Pressure

Influence from members of one's peer group to adopt certain behaviors, values, or conform to group norms.