Selected financial data (in thousands of dollars) for Barnstable Company appear below:
-Between Year 1 and Year 2, the times interest earned ratio:
A) increased
B) decreased
C) remained the same
D) cannot be determined from the data provided

Question

Selected financial data (in thousands of dollars) for Barnstable Company appear below: 
-Between Year 1 and Year 2, the times interest earned ratio:
A) increased 
B) decreased 
C) remained the same 
D) cannot be determined from the data provided

Quizplus · Accepted Answer

The calculation for times interest earned ratio is (Net Income + Interest Expense + Income Tax Expense) / Interest Expense. Based on the given data, interest expense increased from Year 1 to Year 2 while the net income decreased. Therefore, the times interest earned ratio would have decreased in Year 2.

Selected Financial Data (In Thousands of Dollars) for Barnstable Company