Question

key figures for apple and follow.$ millionsapplecurrent yearone year priortwo years priorcurrent yearone year priortwo years priornet income$ 59,531$ 48,351$ 45,687$ 30,736$ 12,662$ 19,478income taxes13,37215,73815,6854,17714,5314,672interest expense3,2402,3231,456114109124required:compute times interest earned for the three years' data shown for each company.in the current year, and using times interest earned, which company appears better able to pay interest obligations?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) ? assume an industry average of 10.

Answer 1

To calculate the times interest earned for Apple and another company, use the formula: (Net Income + Interest Expense + Income Taxes) / Interest Expense. In the current year, Apple appears to be in a good position to pay its interest obligations is 21.66 times.

To calculate the times interest earned for the three years' data for each company, we need to use the formula:

Times Interest Earned = (Net Income + Interest Expense + Income Taxes) / Interest Expense

For Apple's current year, the calculation would be: (59,531 + 3,240 + 13,372) / 3,240 = 21.66 times

Comparing this with the industry average of 10, Apple appears to be in a good position to pay its interest obligations.