Amazon

Year $2$Amazon

Year $1$Walmart

Year $2$WalmartAmazon

Year $2$Amazon

Year $1$Walmart

Year $2$Walmart

Year $1$Interest expense$$$$1,600$$$1,417$$$2,262$$$1,975$Income $($loss$)$ before income tax expense$13,97611,26120,11611,460$Year $1$Interest expense$$$$1,600$$$1,417$$$2,262$$$1,975$Income $($loss$)$ before income tax expense$13,97611,26120,11611,460$

The decline in interest coverage is due to the decrease in interest expense from Year $1$ to Year $2.$The interest coverage indicated by these ratios is lower than would be desired and indicates weak protection for creditors.The interest coverage ratio is low and is due to increased performance in operations.The interest coverage indicated by these ratios suggests that Amazon wil be able to cover interest payments from current$-$period income before tax.

c$.$Does a times interest earned ratio less than $1\mathrm{.}0$ mean that creditors will not get paid interest?

Low times interest earned ratio is an early warning signal, but it does not mean the company will not be able to pay interest to creditors.Yes, a times interest earned ratio means the company does not have sufficient money to pay interest to creditors.No$,$ a times earned ratio less than one is a very favorable position and it indicates the company can meet its interest payment commitments easily.Low times interest earned ratio has nothing to do with payment of interest, it speaks about interest earned.

d$.$Interpret Walmart$$s interest coverage from Year $1$ to Year $2.$

Walmart$$s times interest earned ratio increased and indicates a healthy protection for interest payments to creditors.Walmart$$s times interest earned ratio declined and indicates no protection for interest payments to creditors.Walmart$$s times interest earned ratio increased and indicates no protection for interest payments to creditors.Walmart$$s times interest earned ratio declined and indicates a healthy protection for interest payments to creditors.

e$.$Which company appears to have the greater protection for creditors?

WalmartAmazonBoth companiesNone of the companies