Companies Heidee and Leaudy have the same sales, tax rate, interest rate on their debt, total assets, and basic earning power. Both companies have positive net incomes. Company Heidee has a higher debt ratio and, therefore, a higher interest expense. Which of the following statements is CORRECT?
A. Heidee has more net income than Leaudy.
B. Heidee pays less in taxes than Leaudy.
C. Heidee has a lower equity multiplier than Leaudy.
D. Heidee has a higher ROA than Leaudy.
E. Heidee has a higher times interest earned (TIE) ratio than Leaudy.
Answer: B
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