Companies Heidee and Leaudy have the same tax rate, sales, total assets, and basic earning power. Both
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Question:
Companies Heidee and Leaudy have the same tax rate, sales, 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?Explain
a. Heidee has a lower times interest earned (TIE) ratio than Leaudy.
b. Heidee has a lower equity multiplier than Leaudy.
c. Heidee has more net income than Leaudy.
d. Heidee pays more in taxes than Leaudy.
e. Heidee has a lower ROE than Leaudy.
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