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 only equity to finance its assets A company that uses debt to finance some of its assets Which of the following is true about the leveraging effect? Interest on debt can be deducted from pre-tax income, resulting in a greater taxable income and a smaller available operating income. Interest on debt is a tax-deductible expense, which means that it can reduce a firm's taxable income and tax obligation. Blue Sky Drone Company has a total asset turnover ratio of 8.50x, net annual sales of $25 million, and operating expenses of $11 million (induding depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $1.75 milian on which it pays a 11% interest rate. To analyze a company's financial leverage situation, you need to measure the firm's debt management ration, Based on the preceding information, what are the values for Blue Sky Drone's debt management ratios? Influenced by a frm's ablity to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give toans to companies with debt ratios