(Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014-2016 (just before the housing crash, so these are representative years) are found here: a. Calculate the times interest earned ratio for each of the years for which you have data. b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period? Data Table a. The times interest earned ratio for 2016 was times. (Round to two decimal places.) 2016 2015 2014 The times interest earned ratio for 2015 was times. (Round to two decimal places.) $4,971,000 $4,792,000 $4,149,000 Net operating income (EBIT) Interest expense (516,000) (476,000) (552,000) The times interest earned ratio for 2014 was times. (Round to two decimal places.) $4,419,000 $4,276,000 $3,673,000 Earnings before taxes b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period? (1,870,000) (1,580,000) (1,390,000) Income taxes $2,549,000 $2,696,000 $2,283,000 Net income O A. Lowe's ability to service its debt obligations has been declining every single year. O B. Lowe's ability to service its debt obligations has been increasing lately. Print Done O C. Lowe's ability to service its debt obligations has been steady over the years. O D. Lowe's ability to service its debt obligations has been declining lately.
(Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014-2016 (just before the housing crash, so these are representative years) are found here: a. Calculate the times interest earned ratio for each of the years for which you have data. b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period? Data Table a. The times interest earned ratio for 2016 was times. (Round to two decimal places.) 2016 2015 2014 The times interest earned ratio for 2015 was times. (Round to two decimal places.) $4,971,000 $4,792,000 $4,149,000 Net operating income (EBIT) Interest expense (516,000) (476,000) (552,000) The times interest earned ratio for 2014 was times. (Round to two decimal places.) $4,419,000 $4,276,000 $3,673,000 Earnings before taxes b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period? (1,870,000) (1,580,000) (1,390,000) Income taxes $2,549,000 $2,696,000 $2,283,000 Net income O A. Lowe's ability to service its debt obligations has been declining every single year. O B. Lowe's ability to service its debt obligations has been increasing lately. Print Done O C. Lowe's ability to service its debt obligations has been steady over the years. O D. Lowe's ability to service its debt obligations has been declining lately.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.1DC
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Transcribed Image Text:(Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014-2016 (just before the housing crash, so these are representative years) are found here:
a. Calculate the times interest earned ratio for each of the years for which you have data.
b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period?
Data Table
a. The times interest earned ratio for 2016 was
times. (Round to two decimal places.)
2016
2015
2014
The times interest earned ratio for 2015 was
times. (Round to two decimal places.)
$4,971,000
$4,792,000
$4,149,000
Net operating income (EBIT)
Interest expense
(516,000)
(476,000)
(552,000)
The times interest earned ratio for 2014 was
times. (Round to two decimal places.)
$4,419,000
$4,276,000
$3,673,000
Earnings before taxes
b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period?
(1,870,000)
(1,580,000)
(1,390,000)
Income taxes
$2,549,000
$2,696,000
$2,283,000
Net income
O A. Lowe's ability to service its debt obligations has been declining every single year.
O B. Lowe's ability to service its debt obligations has been increasing lately.
Print
Done
O C. Lowe's ability to service its debt obligations has been steady over the years.
O D. Lowe's ability to service its debt obligations has been declining lately.
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