THE FOLLOWING DATA APPLY TO TWO COMPARABLE COMPANIES THAT ARE IN D...

33. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014

33.

The following data apply to two comparable companies that are in direct competition. Company A Company BTimes interest earned ratio 2.50 2.50Return on equity (ROE) 10.13% 16.88%Return on assets (ROA) 6.75% 11.25%Asset turnover 1.50 2.50Which of the following statements is most accurate? A. Both companies have the same amount of interest expense. B. Company A has a higher degree of financial leverage than Company B. C. Company A has a lower net profit margin.