If two companies have the same revenues and operating expenses,their net incomes will still be different if one company finances its assets with more debt and the other company with more equity.

Question

Quizplus · Accepted Answer

The company that finances its assets with more debt will have higher interest expenses, which will decrease its net income, while the company that finances its assets with more equity will not have interest expenses. Therefore, even if their revenues and operating expenses are the same, their net incomes will be different.

If Two Companies Have the Same Revenues and Operating Expenses,their