Times interest earned ratio : This financial metric gauges the company’s capability to pay the interest expense during a year. Formula: Times interest earned ratio = Income before income tax+Interest expense Interest expense To compute : Times interest earned ratio for Company H and Company M.

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Chapter 11, Problem 11.4ADM

(A)

To determine

Times interest earned ratio: This financial metric gauges the company’s capability to pay the interest expense during a year.

Formula:

Times interest earned ratio = Income before income tax+Interest expenseInterest expense

To compute: Times interest earned ratio for Company H and Company M.

(B)

To determine

To indicate: The company which honors debt payments

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