Information from the Financial Statements Are Provided Below

question 2

Multiple Choice

Information from the financial statements are provided below:

-Refer to Rio Imports. The times interest earned ratio for 2015

• A)increased, which indicates that the company's creditors will be pleased.
• B)decreased, which indicates that the company has less cash to pay interest on its debt.
• C)indicates a decline in the company's ability to pay its liabilities when they come due.
• D)indicates that the company cannot meet its current year interest payments out of current year earnings.

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Definitions:

Accrued Liability

A financial obligation that a company has incurred but has not yet paid out or recorded in its financial statements.

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash is received or paid.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid out.

Accounting

The systematic process of recording, summarizing, and analyzing financial transactions of a business, providing insight into its financial health and performance.