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4. Debt management ratios Aa Aa 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. Which of the following is considered a financially leveraged firm? O A company that uses only equity to finance its assets O A company that uses debt to finance some of its assets Which of the following is true about the leveraging effect? O Under economic growth conditions, firms with relatively more leverage will have higher expected returns O Under economic growth conditions, firms with relatively low leverage will have higher expected returns Chilly Moose Fruit Producer has a total asset turnover ratio of 8.50 x, net annual sales of $40 million, and operating expenses of $18 million (including depreciation and amortization). On its current balance sheet and income statement, respectively, it reported total debt of $2.50 million, 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 Chilly Moose Fruit's debt management ratios? Ratio Value Debt ratio Times-interest-earned ratio Chilly Moose Fruit Producer 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 low high