Explain how you reached the answer or show your work if a mathematical calculati

Question

Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. 2. Companies HD and LD have the same tax rate, sales, total assets, and basic earning power. Both companies have positive net incomes. Company HD has a higher debt ratio and, therefore, a higher interest expense. 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.

Explanation / Answer

e. Company HD has a lower times interest earned (TIE) ratio.

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