Rio Imports
Information from the Financial Statements Is Provided in the Following

question 166

Multiple Choice

Rio Imports
Information from the financial statements is provided in the following table:
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Current liabilities } & \$ 460,000 & \$ 320,000 \\\text { Long-term liabilities } & 240,000 & 640,000 \\\text { Shareholders' equity } & 840,000 & 1,080,000 \\\text { Net cash flows from operating activities } & 160,000 & 102,000 \\\text { Interest and principal payments } & 24,000 & 16,000 \\\text { Net sales } & 950,000 & 900,000 \\\text { Net income } & 180,000 & 144,000 \\\text { Interest expense } & 17,000 & 23,000 \\\text { Income taxes } & 32,000 & 29,000 \\\text { Dividends paid to common shareholders } & 30,000 & 60,000\end{array}$
-Refer to the figure Rio Imports.What does the times interest earned ratio for Year 2 indicate?

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

---

Definitions:

Provincial And National Levels

Pertains to the administrative divisions within a country, covering both the regions governed at an intermediate level (provincial) and the entire country (national).

International Brotherhood Of Teamsters

A large trade union in North America representing a diverse membership in various industries, known for its advocacy on workers’ rights and labor issues.

International Union

A coalition of national trade unions or organizations formed to promote common interests or engage in joint action on an international level.

Example

A representative instance or case used to illustrate or explain a concept, principle, or process.