a company with leverage, or a leveraged company. a company with no leverage, or an unleveraged company. 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 8.50x, net annual sales of $25 million, and operating expenses of $11.25 million (including depreciation and amortization). On its current balance sheet and income statement, respectively, it reported total debt of $2.5 million, on which it pays 11% interest on its outstanding debt. To analyze a company's financial leverage situation, you need to measure the firm's debt management ratios. Based on the preceding information, what are the values for Green Penguin Pencil's debt management ratios? (Note: Do not round intermediate calculations.) Green Penguin Pencil Company raises around from creditors for each dollar of equity. 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)