HD Corp and LD Corp Have Identical Assets,sales,interest Rates Paid

question 96

Multiple Choice

HD Corp and LD Corp have identical assets,sales,interest rates paid on their debt,tax rates,and EBIT.Both firms finance using only debt and common equity,and total assets equal total invested capital.However,HD uses more debt than LD.Which of the following statements is CORRECT?

• A) Without more information,we cannot tell if HD or LD would have a higher or lower net income.
• B) HD would have the lower equity multiplier for use in the DuPont equation.
• C) HD would have to pay more in income taxes.
• D) HD would have the lower net income as shown on the income statement.
• E) HD would have the higher operating margin.

---

Definitions:

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, is a publication by the American Psychiatric Association that provides standardized criteria for the classification and diagnosis of mental disorders.

Criterion

A principle or standard by which something can be judged or decided.

Hypersexual Disorder

A condition characterized by excessive preoccupation with sexual fantasies, urges, or behaviors that is distressing or disruptive to daily functioning.

Diagnostic Criteria

A set of standardized guidelines used to diagnose disorders, including substance use disorders, based on specific symptoms and the duration of those symptoms.