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:

Occupational Segregation

The distribution of people across and within occupations and jobs, influenced by factors like gender, race, and education, often leading to inequality.

Efficient Allocation

The optimal distribution of resources in an economy, ensuring that these resources are used in a way that maximizes the net benefit to society.

Ethnic Groups

Communities of people who share common cultural characteristics, ancestral ties, and social experiences.

Government Programs

Initiatives or plans undertaken by a government to address social, economic, or environmental issues, which may involve legislation, services, or funding.