Question

$ millions Net income Income taxes Interest expense Apple Current One Year Two Years Year Prior Prior $48,351 $45,687 $53, 394 15,738 15,685 19, 121 2,323 1,456 733 Google Current One Year Two Years Year Prior Prior 12,662 19,478 16,348 14,5314,6723, 303 109 124 104 Required: 1. Compute times interest earned for the three years' data shown for each company. 2. In the current year, and using times interest earned, which company appears better able to pay interest obligations? 3. In the current year, and using times interest earned, is the company in a good or bad position to pay interest obligations for (a) Apple, and (b) Google? Assume an industry average of 10. Complete this question by entering your answers in the tabs below. Required i Required 2 Required 3 Compute times interest earned for each of the three years shown. (Round your answer to 2 decimal places.) Current Year One Year Two Years Prior Prior Apple---Times interest eamed Google-Times interest eamed

Answer 1

Times interest earned ratio = (Net income+interest expense+ income taxes)/interest expense

Apple

Current year = 66412/2323

= 28.59 times

One year prior = 43.15 years

2 years prior = 99.93 times

Google

Current year = 250.48 times

One year prior = 195.76 times

Two years prior= 189.95 times

Google is better

Both good since higher than industry average