Paint Company Following are selected data from Paint Company's financial statements.
Refer to the Paint Company data.
The company's times interest earned ratio for 2012
A)shows an increase in the company's ability to pay its current debt when it comes due.
B)indicates the company cannot meet its current year interest payments out of current year earnings.
C)increased,which indicates the company's lenders will be pleased.
D)decreased,which indicates the company has more cash to pay interest on its debt.

Question

Paint Company Following are selected data from Paint Company's financial statements.
 Refer to the Paint Company data.
The company's times interest earned ratio for 2012
A)shows an increase in the company's ability to pay its current debt when it comes due. 
B)indicates the company cannot meet its current year interest payments out of current year earnings. 
C)increased,which indicates the company's lenders will be pleased. 
D)decreased,which indicates the company has more cash to pay interest on its debt.

Quizplus · Accepted Answer

The times interest earned ratio increased from 1.4 in 2011 to 2.2 in 2012, indicating that the company's ability to pay its interest expense has improved. This would be seen as positive by the company's lenders, as it reduces the risk of default on the debt.

Paint Company Following Are Selected Data from Paint Company's Financial