Answer to Question #5966 in Economics of Enterprise for Lamarcus Streeter

Question #5966
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. Give explanation for answer given.
1
Expert's answer
2012-01-12T11:08:06-0500
e. Company HD has a lower times interest earned (TIE) ratio.
Because Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. And HD has a higher debt ratio and, therefore, a higher interest expense.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS
paypal