$r$ has a total asset turnover ratio of $6\mathrm{.}00$ x $,$ net annual sales of $$25$ million, and operating expenses of $$11$ million $($including

tion$).$ On its balance sheet and income statement, respectively, it reported total debt of $$2\mathrm{.}50$ million on which it pays a $7\%$

Aunt Dottie's Linen Inc. reported no long$-$term debt in its most recent balance sheet. A company with no debt on its books is referred to as:

A company with leverage, or a leveraged company

A company with no leverage, or an unleveraged company

Which of the following is true about the leveraging effect?

Interest on debt is a tax$-$deductible expense, which means that it can reduce a firm's taxable income and tax obligation.

Interest on debt can be deducted from pre$-$tax income, resulting in a greater taxable income and a smaller available operating income.