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:

$\text{Times interest earned ratio = }\frac{\text{Income before income tax+Interest expense}}{\text{Interest expense}}$

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

(B)

To determine

To indicate: The company which honors debt payments