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The times-interest-earned (TIE) ratio shows how well a firm can cover its interest payments with operating income. Compare the income statements of Lost Pigeon Aviation
The times-interest-earned (TIE) ratio shows how well a firm can cover its interest payments with operating income. Compare the income statements of Lost Pigeon Aviation and Purple Panda Importers and calculate the TIE ratio for each firm. Complete the following statement, based on the calculations you have already made. Describe the relationship between the TIE ratios of the two companies. Purple Panda Importers has a greater TIE ratio than Lost Pigeon Aviation. Lost Pigeon Aviation has a greater TIE ratio than Purple Panda Importers. The companies have equal TIE ratios. Which company is in better position to cover its interest payments, and therefore exhibits lower risk, than the other? Lost Pigeon Aviation is in a better position to cover its interest payment. Both companies are equally positioned to cover their interest payments. Purple Panda Importers is in a better position to cover its interest payment
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