Question
Below is information for year ended 12/31/15 for Company A and Company B. Company A Company...
Below is information for year ended 12/31/15 for Company A and Company B.
| Company A | Company B | |
| Interest expense | $ 400 | $ 0 |
| Tax expense (40%) | 400 | 400 |
| Net income | 600 | 600 |
| Total assets | 10,000 | 10,000 |
| Total debt | 5,000 | 0 |
| Equity | 5,000 | 10,000 |
Which of the following statements is correct?
Group of answer choices
Company A has same ROE than Company B
Company A has used financial leverage to increase its return to its shareholders
Company A has a lower ROA than Company B
Company A has a lower ROE than Company B
Homework Answers
Answer #1
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