Companies Heidee and Leaudy Are Virtually Identical in That They

question 29

Multiple Choice

Companies Heidee and Leaudy are virtually identical in that they are both profitable, and they have the same total assets (TA) , Sales (S) , return on assets (ROA) , and profit margin (PM) .However, Company Heidee has the higher debt ratio.Which of the following statements is CORRECT?

• A) Heidee has lower operating income (EBIT) than Leaudy.
• B) Heidee has a lower total assets turnover ratio than Leaudy.
• C) Heidee has a lower equity multiplier than Leaudy.
• D) Heidee has a higher fixed assets turnover ratio than Leaudy.
• E) Heidee has a higher ROE than Leaudy.

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Definitions:

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated as the profit from an investment divided by the cost of the investment.

Investment Turnover

A measure of a company's efficiency in using its investments to generate sales revenue.

Profit Margin

A financial metric that measures the amount of net income generated as a percentage of revenues, indicating the efficiency of a company in turning sales into profits.

Over Budget

A situation where actual spending exceeds the planned or allocated budget for a project or operation.