An Analyst Is Evaluating Two Companies,A and B

question 7

Multiple Choice

An analyst is evaluating two companies,A and B.Company A has a debt ratio of 50% and Company B has a debt ratio of 25%.In his report,the analyst is concerned about Company B's debt level,but not about Company A's debt level.Which of the following would best explain this position?

• A) Company B has much higher operating income than Company A.
• B) Company A has a lower times interest earned ratio and thus the analyst is not worried about the amount of debt.
• C) Company B has a higher operating return on assets than Company A, but Company A has a higher return on equity than Company B.
• D) Company B has more total assets than Company A.

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Definitions:

Behaviourism

A school of psychology that focuses on observable behaviors and disregards mental activities.

Functionalism

A theory in psychology that considers mental life and behavior in terms of active adaptation to the person's environment.

William James

Often referred to as the father of American psychology, he was a philosopher and psychologist who was the first educator to offer a psychology course in the United States, making significant contributions to psychology, especially in the areas of education, religion, and mysticism.

Conscious Experience

The state of being aware of and able to think about one's own existence, sensations, thoughts, surroundings, etc.