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4. Debt (or leverage) management ratios Companies have the opportunity to use varying amounts of different sources of financing, inciuding internal and external sources, to acquire their assets, debt (borrowed) funds, and equity funds. Company A uses long-term debt to finance its assets, and company 8 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? Under economic grewth conditions, firms with relatively mere leverage will have higher expected returns. Under economic growth conditions, firms with reiatively low leverage will have higher expected returns. Purple Panda Products Inc. has a total asset turnover ratio of 6.00x, net annusl sales of $25 million, and operating expenses of $11 milion (including depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which it pays a 11 \% interest rate. To anaigre a compary's financial leverage stuation, you need to measure the firms debt management ratios. Based on the preceding informotion. Purple Panda Products inc. has a total asset tumover ratio of 6.00x, net annual sales of $25million, and operating expenses of s11 mifion (including depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which it pays a 11.6 . interest rate. To analyze a company's finandal leverege situation, you need to measure the firm's debe management ratios: Based on the preceding information, what are the values for Purple Panda's debt management ratios? Infuenced by a firm's ability to make interest payreents and pay back its debt, if ait eise is equal, creditors would prefer to give loans to companies with = bmesinterest-eamed ratios (TIL)