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) Company Heidee has more net income.
B) Company Heidee pays less in taxes.
C) Company Heidee has a lower equity multiplier.
D) Company Heidee has a higher ROA.
E) Company Heidee has a higher times interest earned (TIE)ratio.

Question

Quizplus · Accepted Answer

Company Heidee pays less in taxes because it has a higher interest expense, which reduces taxable income.

Companies Heidee and Leaudy Have the Same Sales,tax Rate,interest Rate