Question

4. Debt management ratios Aa Aa E 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 debt to finance some of its assets O A company that uses only equity to finance its assets Which of the following is true about the leveraging effect? Using leverage can generate shareholder wealth, but if a company fails to make the interest and principal payments on its debt, credit default can reduce shareholder wealth. Using leverage reduces a firm's potential for gains and losses. O 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 times-interest-earned ratios (TIE).

Answer 1

rate positively ..

Ans 1		Correct answer is option :
		A company that uses debt to finance some of its asset
Ans 2		Correct answer is option :
		Using leverage can generate shareholder's wealth but if a company fails to make the interest and principal payments on its debt, credit default can reduce shareholder wealth
Ans 3		Correct answer is option :
		IF all else equal creditor would prefer to give loans to companies with HIGHER time interest earned ratios.