You Decide: If a young company has a negative “times interest earned” ratio,
should the company be refused or given a loan by lenders?
Design Arts Inc. is a young computer game design company that has been in business for
two years. The company has been working on a computer game that is scheduled for release
in six months. However, it has exhausted all its financial resources and needs one last
loan of $100,000 to help it meet its deadline. The company has not had any revenues up to
this point but knows that once the game hits the market, it will be extremely profitable.
Would you make a loan to this company?