Below Is Information for Year Ended 12/31/05 for Company a and Company

Below is information for year ended 12/31/05 for Company A and Company B. $\begin{array}{lrr}&\text { Company A }&\text { Company B }\\\text { Interest expense } & \$ 400 & \$ \\\text { Tax expense }(40 \%) & 400 & 400 \\\text { Net income } & 600 & 600 \\\text { Total assets }-12 / 31 / 05 & 10,000 & 10,000 \\\text { Total debt } & 5,000 & 0 \\\text { Equity } & 5,000 & 10,000\end{array}$
-Financial leverage ratio for Company A and B for 2005 are: $\begin{array}{lll}&\text { Company A }&\text { Company B }\\\text { A) } & 2.00 & 0.0 \\\text { B) } & 1.00 & 0.0 \\\text { C) } & 0.70 & 0.6 \\\text { D) } & 0.50 & 1.0\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Correct Answer:

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