4Companies HD and LD have identical amounts of assets, operating income (EBIT), tax rates, and business risk. Company HD, however, has a much higher…

4Companies HD and LD have identical amounts of assets, operating income (EBIT), tax rates, and business risk. Company HD, however, has a much higher debt ratio than LD. Company HD’s basic earning power ratio (BEP) exceeds its cost of debt (rd). Which of the following statements is CORRECT? 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. there is no word limit. Please, write the explanation. Thank you
Question:4Companies HD and LD have identical amounts of assets, operating income (EBIT), tax rates,and business risk. Company HD, however, has a much higher debt ratio than LD. CompanyHD’s…







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