Two Companies Have Identical Assets and Operating Activities

question 78

Multiple Choice

Two companies have identical assets and operating activities.Which of the follow statements is true?

• A) Both companies have the same net income.
• B) The company with more debt will have lower operating income due to interest expense.
• C) The company with more debt will have higher operating income due to leverage.
• D) The company with more debt will have lower net income due to interest expense.

---

Definitions:

Modernization Theory

A theory suggesting that traditional societies will develop economically and socially to become more 'modern', following the patterns of Western societies.

Technological Change

The process by which new technologies are developed and introduced into society, influencing various aspects of life.

Dependency Theory

A theory suggesting that the economic conditions of wealthier nations are directly linked to the poverty of less developed nations, due to an unequal global system that benefits rich countries at the expense of poorer ones.

Economic Success

The achievement of financial goals and stability, often measured by factors such as income, wealth accumulation, and employment status.