Chapter 11, Problem 11.24E

1.

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:

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

To calculate: Times-interest-earned ratio for Company C and Company P for 2018.

2.

To determine

To identify: The company which is better able to cover its interest expense.