Companies HD and LD are both profitable, and they have the same total assets (TA), total invested capital, sales (S), return on assets (ROA), and profit margin (PM). Both firms finance using only debt and common equity. However, Company HD has the higher total debt to total capital ratio. Which of the following statements is CORRECT? a. Company HD has a higher ROE than Company LD. b. Company HD has a lower total assets turnover than Company LD. c. Company HD has a lower equity multiplier than Company LD. d. Company HD has a lower operating income (EBIT) than Company LD. e. Company HD has a higher fixed assets turnover than Company LD.
Companies HD and LD are both profitable, and they have the same total assets (TA), total invested capital, sales (S), return on assets (ROA), and profit margin (PM). Both firms finance using only debt and common equity. However, Company HD has the higher total debt to total capital ratio. Which of the following statements is CORRECT? a. Company HD has a higher ROE than Company LD. b. Company HD has a lower total assets turnover than Company LD. c. Company HD has a lower equity multiplier than Company LD. d. Company HD has a lower operating income (EBIT) than Company LD. e. Company HD has a higher fixed assets turnover than Company LD.
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter14: Completing A Quality Audit
Section: Chapter Questions
Problem 24CYBK
Related questions
Question
Companies HD and LD are both profitable, and they have the same total assets (TA), total invested capital, sales (S), return on assets (ROA), and profit margin (PM). Both firms finance using only debt and common equity. However, Company HD has the higher total debt to total capital ratio. Which of the following statements is CORRECT?
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