A company with no leverage, or an unleveraged company A company with leverage, or a leveraged 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. depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $1.75 million on it 119 interest rate. 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 Chilly Moose Fruit's debt 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)