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jolli1 [7]
3 years ago
14

Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on th

eir debt. Both firms finance using only debt and common equity, and total assets equal total invested capital. However, company HD has a higher total debt to total capital ratio. Which of the following statements is CORRECT?
a. Company HD has a lower equity multiplier.
b. Company HD has more net income.
c. Company HD pays more in taxes.
d. Company HD has a lower ROE.
e. Company HD has a lower times-interest-earned (TIE) ratio
Business
1 answer:
aliina [53]3 years ago
7 0

Answer:

B) Company HD has more net income.

Explanation:

The total debt to capital ratio is calculated by dividing total liabilities by the sum of total shareholders' equity + total debt:

  • debt to capital ratio = total debt / (total debt + total equity)

Since company HD uses more debt to finance its operations, its net income will be lower since it has to pay more interests, but its ROE will be higher since equity is much lower also. Companies that use a lot of financial leverage are more risky but at the same time can generate higher returns to their owners.

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The right answer for the question that is being asked and shown above is that: "Mr Chavez did not increase his assets or his net worth."
<span>Mr Chavez has assets of S250.000 and liabilities of $18 000 Hedecides to finance the entire amount of tho purchase of a carvalued at S20000. That statement is true.</span>
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3 years ago
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4.65% is the component cost of the debt for use in the wacc calculation
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3 years ago
What role do primary financial markets play in our economy? What role do secondary markets fill? Describe the relationship that
Bezzdna [24]

Answer:

What role do primary financial markets play in our economy?

The key function of the primary market is to facilitate capital growth by enabling individuals to convert savings into investments. It facilitates companies to issue new stocks to raise money directly from households for business expansion or to meet financial obligations

What role do secondary markets fill?

Secondary markets include option markets and deal markets in which ownership of securities is transferred. Investors create auction markets, such as the New York Stock Exchange, by congregating in one physical area to announce bids and ask prices and to trade and sell stock.

Describe the relationship that exists between financial institutions and financial markets and suggest a method in which this relationship can run more smoothly.

Financial instruments are those instruments that allow you to take an exposure to a specific type of risk, or simply to invest your money! Financial instruments are bought and sold by all the financial institution with different goals (to get a fixed return, to speculate, to provide short term and long term funding, to achieve a specific rate of return, to fund themselves, to buy or sell for a client…) and in different ways.

Financial markets are the places where Financial Instruments are bought and sold by Financial Institutions.

Explanation:

What role do primary financial markets play in our economy?

The key function of the primary market is to facilitate capital growth by enabling individuals to convert savings into investments. It facilitates companies to issue new stocks to raise money directly from households for business expansion or to meet financial obligations

What role do secondary markets fill?

Secondary markets include option markets and deal markets in which ownership of securities is transferred. Investors create auction markets, such as the New York Stock Exchange, by congregating in one physical area to announce bids and ask prices and to trade and sell stock.

Describe the relationship that exists between financial institutions and financial markets and suggest a method in which this relationship can run more smoothly.

Financial instruments are those instruments that allow you to take an exposure to a specific type of risk, or simply to invest your money! Financial instruments are bought and sold by all the financial institution with different goals (to get a fixed return, to speculate, to provide short term and long term funding, to achieve a specific rate of return, to fund themselves, to buy or sell for a client…) and in different ways.

Financial markets are the places where Financial Instruments are bought and sold by Financial Institutions.

7 0
3 years ago
In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour,Japan can produce 30 tons of steel o
MArishka [77]

Answer:

Option (D) is correct.

Explanation:

In United states:

Can produce 25 tons of steel or 250 automobiles,

Opportunity cost of producing a ton of steel = 250 ÷ 25

                                                                          = 10 automobiles

Opportunity cost of producing 1 automobile = 25 ÷ 250

                                                                         = 0.1 tons of steel

In Japan:

Can produce 30 tons of steel or 275 automobiles,

Opportunity cost of producing a ton of steel = 275 ÷ 30

                                                                          = 9.17 automobiles

Opportunity cost of producing 1 automobile = 30 ÷ 275

                                                                         = 0.11

Therefore,

United States has a comparative advantage in producing automobiles because the opportunity cost of producing automobiles is lower than the Japan.

Japan has a comparative advantage in producing steel because the opportunity cost of producing steel is lower than the United states.

7 0
3 years ago
When countries such as the U.S. promote production of domestic​ cotton, developing countries that produce cotton are hurt.​ Why?
uysha [10]

Answer:

Explanation:

They are hurt because cotton is one of their exports and a developing nations needs to be able to make money from them so if a big country takes away one of their main exports it will hurt their economy.

5 0
3 years ago
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