Times Interest Earned

Iacouva Company reported the following on the companys income statement for two recent years:

	Current Year		Prior Year
Interest expense	$691,000		$691,000
Income before income tax expense	10,779,600		11,263,300

a. Determine the times interest earned ratio for the current year and the prior year. Round to one decimal place.

Current year	fill in the blank 1
Prior year	fill in the blank 2

b. Although the company has enough earnings to pay interest in the current year, the

decreaseincreasedecrease

in this ratio

is a causeis not a causeis a cause

for concern to debtholders.