Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds. Company A uses long-term debt to finance its assets, and company B uses capital generated from shareholders to finance its assets. Which company would be considered a financially leveraged firm? Company A Company B Which of the following is true about the leveraging effect? Using financial leverage reduces a firm's potential for gains and losses. Using financial leverage can generate shareholder wealth, but if a company fails to make ine the interest and principal payments debt, credit default can reduce shareholder wealth. Blue Sky Drone Company has a total asset turnover ratio of 4.00, net annual sales of $40,000,000, and operating expenses $30,000,000 (including depreciation and amortization). On its current balance sheet and income statement, respectively, it reported total debt of $4,625,000, on which it pays 7% 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 Blue Sky Drone's debt management ratios? (Note: Round your answers to two decimal places.) Blue Sky Drone 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 debt ratios