Answer to Question #6764 in Economics of Enterprise for LaMarcus Streeter
a. Company HD has a higher return on assets (ROA) than Company LD.
b. Company HD has a higher times interest earned (TIE) ratio than Company LD.
c. Company HD has a higher return on equity (ROE) than Company LD, and its risk, as measured by the standard deviation of ROE, is also higher than LD’s.
d. The two companies have the same ROE.
e. Company HD’s ROE would be higher if it had no debt.
Because the debt of
HD is higher, so its ROE is smaller.
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This is wrong. More debt will equal a HIGHER ROE