Interpreting Credit Ratings Cummins Inc. reports the following information in the Management Discussion & Analysis section of its 2015 10-K report.

Credit Ratings Our ratings and outlook from each of the credit rating agencies as of the date of filing are shown in the table below.

Credit Rating Agency Senior L-T Debt Rating Outlook Standard & Poor’s Rating Services . . . . . . . . . . . . A1 Stable Fitch Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1 Stable Moody's Investors Service Inc. . . . . . . . . . . . . . . . A2 Stable Management’s Assessment of Liquidity Our financial condition and liquidity remain strong. Our solid balance sheet and credit ratings enable us to have ready access to credit and the capital markets. We believe our liquidity provides us with the financial flexibility needed to fund working capital, common stock repurchases, capital expenditures, dividend payments, acquisitions of our North American distributors, projected pension obligations, debt service obligations and severance payments. We continue to generate cash from operations in the U.S. and maintain access to $1.7 billion of our revolver as noted above.

a. Cummins has reduced the level of its financial leverage over the past several years. How does the reduction in financial leverage likely affect Cummins’ credit ratings?

b. What effect will less financial leverage have on Cummins’ borrowing costs? Explain.