Cummins Inc. reports the following information in the Management Discussion \& Analysis section of its 2012 10-K report.

a. Cummins has reduced the level of its financial leverage over the past several years. Why does the reduction in financial leverage result in an increase in the credit ratings for Cummins' debt?

b. What effect will a higher credit rating have on Cummins' borrowing costs? Explain.

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Credit Ratings A number of our contractual obligations and financing agreements, such as our revolving credit facility, have restrictive covenants and/or pricing modifications that may be triggered in the event of downward revisions to our corporate credit rating. There were no downgrades of our credit ratings in 2012 that have impacted these covenants or pricing modifications. In September 2011, Standard & Poor's Rating Services upgraded our rating to 'A' and changed our outlook to stable. In November 2011, Moody's Investors Service, Inc. raised our rating to 'Baa1' and changed our outlook to positive. In October 2012, Fitch Ratings upgraded our ratings to 'A' and changed our outlook to stable. Our ratings and outlook from each of the credit rating agencies as of the date of filing are shown in the table below.