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Do leverage can have an impact on financial ratios

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Reference no: EM132490810

Budget Ltd. Completed the following transactions:

October 1, 2017: Provided consulting services to Sealrom Corporation on account, $10,000, terms 30 days.

November 1, 2017: Accepted a one-year, 6% note from Sealrom Corporation to settle its account.

December 31, 2017: Accrued interest on the note from Budget Corporation (round to the nearest dollar).

December 31, 2017: Budget received all the interest from Sealrom Corporation. Budget accept a new one -year, 12% note from Sealrom to replace the previous note.

Required

Question 1. Record entries for the above transactions.

Question 2. Do you think that leverage can have an impact on financial ratios? Which category of ratios will be most impacted if Sealrom Ltd. keeps on borrowing? What do you advise to the company?

Reference no: EM132490810

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