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Companies have the opportunity to use varying amounts of different sources of financing, including internal and external sources, to acquire their assets, debt (borrowed) funds, and equity funds. Which of the following is considered a financially leveraged firm? A company that uses debt to finance some of its assets A company that uses only equity to finance its assets Which of the following is true about the leveraging effect? Using leverage can generate shareholder wealth, but if a company fails to make the interest and principal payments on its debt, credit default can reduce shareholder wealth. Using leverage reduces a firm's potential for gains and losses. Green Penguin Pencil Company has a total asset turnover ratio of 3.50x, net annual sales of $40 million, and operating expenses of $18 million (including depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which it pays a 11% interest rate. Influenced by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE). pays a 11% interest rate. To analyze a company's financial ituation, you need to measure the firm's debt management ratios. Based on the preceding information, \begin{tabular}{|l|l|} what are the values for Green Pe & 21.87% \\ \hline 28.43% \end{tabular} Influenced by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE). 1, you need to measure the firm's debt management ratios. Based on the preceding information, it management ratios? Influenced by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE). Influe - 'a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE)

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