Remember that much of our text is based on theory. In other words, because of tax effects of leverage a profitable firm which is highly leveraged should have a higher EPS and a higher ROE than a similar firm that is not as highly leveraged. Look up your favorite firm and a competitive firm in the same industry. Check EPS, ROE and Debt to Equity Ratio. Does the firm with the highest Debt to Equity Ratio also have the highest EPS and ROE