1. Times interest earned ratio indicates:

1. a companys ability to meet its interest obligations through current operations.
2. the availability of sufficient cash with the company to pay its interest expense.
3. whether most of the companys assets have come from borrowing or from its own operations.
4. a managements efficiency at borrowing at a lower cost (interest expense).
5. how efficiently the debt was used to generate incom

2. Atlantis Corporation ended the year with assets of $400,000 and owners equity of $160,000. Compute Atlantis debt-to-equity ratio.
   1. 2.5 to 1
   2. 1.5 to 1
   3. 0.4 to 1
   4. 0.6 to 1
   5. 1.7 to 1

3. At the beginning of the year, Florida Company had liabilities of $660,000 and total assets of $1,000,000. During the year, a liability of $50,000 was paid off. The debt-to-equity ratio:

1. at the beginning of the year was 1.79 to 1.
2. increased to 1.94 to 1 at the end of the year.
3. remained at 1.79 to 1 throughout the year.
4. decreased to 1.79 to 1 at the end of the year.
5. at the end of the year was 2.09 to 1

1. Modern Company reported a net income of $280,000 for the year 20X5. Income tax expense and interest expense for the year amounted to $56,000 and $63,000 respectively. The company had assets worth $1,200,000 and liabilities of $890,000. Calculate the times interest earned ratio for the year.
   1. 3.6 times
   2. 6.3 times
   3. 4.4 times
   4. 2.9 times
   5. 2.3 times