Companies use different sources for financing their assets-internal resources as well as external resources, and debt (borrowed) as well as 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 leverage can generate shareholder wealth, but if a company fails to make payments on its debt, credit default can reduce shareholder wealth. Using leverage reduces the potential of gains and losses. 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