Companies Heidee and Leaudy Are Virtually Identical in That They

question 73

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

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Definitions:

Board of Directors

A group of individuals elected by shareholders to oversee the management and make major decisions for a corporation.

Accumulated Other Comprehensive Income

A component of shareholders' equity that includes income not recognized in the profit and loss account, such as unrealized gains on securities and foreign exchange differences.

Shareholders' Equity

The residual interest in the assets of an enterprise after deducting liabilities, representing the ownership interest of shareholders.

Retained Earnings

The portion of net income that is kept by the company rather than distributed to its shareholders as dividends.