31. If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash.
32. If a company provides services to a customer on credit, the service provider company should credit Accounts Receivable.
33. When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue.
34. The debt ratio reflects the risk of a company to both its owners and creditors.
35. The higher the debt ratio, the higher risk of a company not being able to meet its obligations.
36. The debt ratio is calculated by dividing total assets by total liabilities.
37. A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.
38. If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt.
39. Hamilton Industries has total liabilities of $105 million and total assets of $350 million. Its debt ratio is 333.3%.
40. High financial leverage is always bad for a company's owners.