Chapter 12, Problem 12.9APE

a)

To determine

Times-Interest-Earned ratio: It is the ratio that quantifies a business ability to pay interest expense. It is calculated as shown below:

$\begin{array}{l}\text{Times-interest-}\\ \text{earned ratio}\end{array}\}=\frac{\text{Income}\text{before}\text{income}\text{tax}+\text{Interest expense}}{\text{Interest expense}}$

To calculate: Times-interest-earned ratio for the current year 2016 and the prior year 2015.

b)

To determine

To compare: Times-interest-earned ratio of the current year 2016 from the prior year 2015.