Firms A and B are in all points identical with the exception of their choice of sources of financing outside their shareholders' equity.Firm A has one third of its liabilities in the form of long-term loans,one third in the form of overdraft and one third representing accounts payables.Firm B has two third of its liabilities as interest-bearing long-term debt,no overdraft and one third as accounts payable.In the first year of their operations,in a 'normal' interest market,which of the two firms will show the higher profit after interest expenses (before taxes).
A) Firm B will have the higher profit before taxes.
B) Firm A will show the higher profit before taxes.
C) Both firms will report the same amount of profit.

Question

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The Answer of Firms A and B are in all points identical with the exception of their choice of sources of financing outside their shareholders' equity.Firm A has one third of its liabilities in the form of long-term loans,one third in the form of overdraft and one third representing accounts payables.Firm B has two third of its liabilities as interest-bearing long-term debt,no overdraft and one third as accounts payable.In the first year of their operations,in a 'normal' interest market,which of the two firms will show the higher profit after interest expenses (before taxes).
A) Firm B will have the higher profit before taxes.
B) Firm A will show the higher profit before taxes.
C) Both firms will report the same amount of profit.

Firms a and B Are in All Points Identical with the Exception