Companies HD and LD Have the Same Total Assets, Operating

question 62

Multiple Choice

Companies HD and LD have the same total assets, operating income Which of the following statements is CORRECT?

• A)HD should have a higher return on assets (ROA) than LD.
• B)HD should have a higher times interest earned (TIE) ratio than LD.
• C)HD should have a higher return on equity (ROE) than LD, but its risk, as measured by the standard deviation of ROE, should also be higher than LD's.
• D)Given that BEP > rd, HD's stock price must exceed that of LD.
• E)Given that BEP > rd, LD's stock price must exceed that of HD.

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Definitions:

Tangible Property

Physical assets that can be seen, touched, and valued, such as real estate, equipment, and goods.

iPhone

A line of smartphones designed and marketed by Apple Inc., featuring a multi-touch interface, cellular connectivity, and a variety of applications.

Reasonable Care

The degree of care that a reasonably prudent person would have used under the same circumstances and conditions.

Liable

Liable refers to the state of being legally responsible for something, typically involving the obligation to compensate for damage or loss caused.