Chapter 11, Problem 2ADM

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 Compute: Times-interest-earned ratio for the three years.

B.

To determine

To explain: the interpretation of a negative ratio.

C.

To determine

To explain: whether the trend is improving or deteriorating.