Use the information in E13-3 to complete the following requirement.

Information in E13-3:

2013 2012

Sales Revenue..............................................$100,000.............$120,000

Cost of Goods Sold..........................................60,000................71,500

Gross Profit....................................................40,000................48,500

Selling, General, and Administrative Expenses...........36,000................37,000

Interest Expense...................................................500....................475

Income before Income Tax Expense.........................3,500................11,025

Income Tax Expense............................................1,000.................5,000

Net Income....................................................$ 2,500...............$ 6,025

Required:

Compute the times interest earned ratios for 2013 and 2012. In your opinion, does Computer Tycoon generate sufficient net income (before taxes and interest) to cover the cost of debt financing?