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Question
An analyst is evaluating two companies, A and B. Company A has a debt ratio of 50% and Company B has a debt ratio of 25%. In his report, the analyst is concerned about Company B's debt level, but not about Company A's debt level. Which of the following would best explain this position?A) Company B has much higher operating income than Company A.
B) Company A has a lower times interest earned ratio and thus the analyst is not worried about the amount of debt.
C) Company B has a higher operating return on assets than Company A, but Company A has a higher return on equity than Company B.
D) Company B has more total assets than Company A.
Answer
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