Companies Heidee and Leaudy Have the Same Total Assets, Sales

question 26

Multiple Choice

Companies Heidee and Leaudy have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt. However, company Heidee has a higher debt ratio. Which of the following statements is CORRECT?

• A) if the interest rate the companies pay on their debt is less than their basic earning power (bep), then company heidee will have the higher roe.
• B) given this information, leaudy must have the higher roe.
• C) company leaudy has a higher basic earning power ratio (bep).
• D) company heidee has a higher basic earning power ratio (bep).
• E) if the interest rate the companies pay on their debt is more than their basic earning power (bep), then company heidee will have the higher roe.

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Definitions:

USMCA

The United States–Mexico–Canada Agreement, a trade deal that replaced NAFTA to govern trade relations between these three countries.

Tariff Barriers

Taxes or duties imposed on imported or exported goods to regulate trade and protect domestic industries from foreign competition.

Canada

A country in North America, known for its vast landscapes, multicultural cities, and as the second largest country in the world by total area.

USMCA

The United States-Mexico-Canada Agreement, which is a trade agreement between these three countries intended to replace NAFTA.