Companies HD and LD have the same tax rate, sales, total assets, and basic earnings power. Both companies have positive net incomes. Company HD has a higher debt ratio, and therefore a higher interest expense. Which of the following is correct?
a. Company HD has a lower equity multiplier.
b. Company HD has more net income.
c. Company HD pays more in taxes.
d. Company HD has a lower ROE.
e. Company HD has a lower times-interest-earned (TIE) ratio.