Balance Sheet and Income Statement Data Indicate the Following ​ (A) for Each Company, What Is the Times Interest

question 130

Essay

Balance sheet and income statement data indicate the following: $\begin{array}{lrr}&\text { Company A } & \text { Company B } \\\text { Bonds payable, } 8 \%, 24 \text {-year bonds } & \$ 1,200,000 & \$ 900,000 \\\text { Income before income tax for year } & 495,000 & 130,000 \\\text { Income tax for year } & 75,000 & 12,000 \\\text { Interest payable } & 50,000 & 0 \\\text { Interest receivable } & 21,000 & 28,000\end{array}$ ​ (a) For each company, what is the times interest earned ratio? (Round to one decimal place)
(b) Which company gives potential creditors more protection?

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Definitions:

Strategic Mistakes

Errors in judgment or poor decision-making in planning and implementing strategies that negatively impact an organization's success.

Entrepreneurs

Individuals who initiate, manage, and assume the risks of a business or enterprise.

High-potential Ventures

Businesses or projects characterized by their significant growth potential and capability to yield substantial returns on investment.

Small Businesses

Companies with a limited number of employees and revenue, playing a significant role in the economy.