According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Lets see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016.

	2016				2015
Sales Revenue		$	110,000			$	135,000
Cost of Goods Sold			65,000				75,500
Gross Profit			45,000				59,500
Selling, General, and Administrative Expenses			37,000				39,000
Interest Expense			600				525
Income before Income Tax Expense			7,400				19,975
Income Tax Expense			1,500				6,000
Net Income		$	5,900			$	13,975

Required:

1. Compute the times interest earned ratios for 2016 and 2015. (Round your answers to 1 decimal place.)

2. Does Computer Tycoon generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing?

multiple choice

Yes

No