Firm a and Firm B Have the Same Total Assets

question 97

Multiple Choice

Firm A and Firm B have the same total assets, ROA and profit margin. However, Firm B has a higher debt ratio and interest expense than Firm A. Which of the following statements is correct?

• A) Firm B must have a higher ROE than firm A.
• B) Firm B must have a higher capital intensity ratio than Firm A.
• C) Firm B must have a higher fixed asset turnover than Firm A.
• D) Firm B must have a lower ACP than Firm A.

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Definitions:

UPA

Stands for Uniform Partnership Act, which is a statute that governs partnership formation and operation in the United States, aiming to provide a consistent legal framework for businesses operating as partnerships.

RUPA

Revised Uniform Partnership Act, an updated version of the Uniform Partnership Act that includes changes to accommodate modern business practices.

Obligations

Duties or commitments that individuals or organizations are legally bound to fulfill, such as contractual agreements or debt repayment.

Existing Partnership

An existing partnership refers to a business partnership that is currently in operation, implying a previously established legal agreement between two or more parties to conduct business together.