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Firlakuza [10]
3 years ago
15

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.
Business
1 answer:
ale4655 [162]3 years ago
3 0

Answer:

e. Company Heidee has a higher ROE than Company Leaudy.

Explanation:

Return on equity measures how well the management of a business uses owner's equity to get returns. It is calculated by dividing net income by owner's equity.

That is

ROE= Net Income ÷ Owner's equity

Considering the accounting equation

Asset= Liability + Owner equity

Owner equity= Asset - Liability

From the equation when a company that take on more debt owner's equity will reduce.

The effect of reduction in owner's equity on Return on Equity is that it will increase the ratio, since owner's equity is the denominator.

In this scenario both companies have the same profit margin so if company Heidee has higher debt ratio it follows that it also has a higher ROE than Company Leaudy

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B

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Answer:

he started and managed a business.

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Entrepreneur is the person who is willing to take risk by putting his capital to create and operates business.

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A company borrowed cash from the bank and signed a 6-year note at 7% annual interest. The present value for an annuity (series o
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Explanation:

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5 0
3 years ago
If sales volume increases and all other factors remain constant, then the:______.
Montano1993 [528]

If sales volume increases and all other factors remain constant, then the Margin of safety will increase

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6 0
3 years ago
Tony works in purchasing for the Epic Electronics on the East Coast. He arrives at work at 6:00 a.m. and leaves by 3:00 p.m. He
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A. the company is required to hire twice as many people and spend additional funds training these individuals.

B. there is a one-hour window of opportunity to talk with employees on the West Coast, who work 8:00 a.m. to 5:00 p.m.

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