QUESTION 10

Information from Nue Company's financial statements is provided below.

	2013	2012
Current liabilities	$250 000	$170 000
Non-current liabilities	130 000	340 000
Shareholders' equity	440 000	560 000
Net cash flows from operating activities	70 000	61 000
Interest and principal payments	14 000	9 000
Net sales	475 000	450 000
Total comprehensive income	90 000	72 000
Interest expense	7 500	13 500
Income tax	18 000	12 500
Dividends paid to ordinary shareholders	16 000	28 000

The times interest earned ratio:

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