Respuesta :
At the times of sale, Lester corp. sells merchandise:
(a) sales tax payable of $100
(b) sales revenue of $1,000
What is the ratio of times interest earned?
A ratio of less than one is a significant indication of approaching bankruptcy since it shows that a company may not be able to meet its interest payments and is therefore more likely to fail on its debt. It is easier for creditors and investors to determine if a liability will need the use of cash or another asset by categorising liabilities as current or long-term. It doesn't matter if these liabilities have a time value of money component.
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