HD Corp and LD Corp Have Identical Assets,sales,interest Rates Paid

question 96

Multiple Choice

HD Corp and LD Corp have identical assets,sales,interest rates paid on their debt,tax rates,and EBIT.Both firms finance using only debt and common equity,and total assets equal total invested capital.However,HD uses more debt than LD.Which of the following statements is CORRECT?

• A) Without more information,we cannot tell if HD or LD would have a higher or lower net income.
• B) HD would have the lower equity multiplier for use in the DuPont equation.
• C) HD would have to pay more in income taxes.
• D) HD would have the lower net income as shown on the income statement.
• E) HD would have the higher operating margin.

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Definitions:

Hippocampal Complex

A major component of the brain involved in memory formation, organization, and retrieval, as well as spatial navigation.

Long-Term Memories

Memories that are stored for an extended period, ranging from a few days to decades.

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An extreme form of memory loss that obstructs the recall of fundamental personal information and past experiences.

Anterograde Amnesia

A loss of the ability to create new memories after the event that caused the amnesia, while long-term memories from before the event remain intact.