The times interest earned ratio for 20Y8 and 20Y9 are 11 and 12.6 respectively.
The change in the times interest earned ratio is favorable.
According to the question,
In 20Y8 and 20Y9, Averill Products Inc. disclosed the following on its income statement:
For 20Y9,
Interest expense= $440,000
Income before income tax expense= $5,544,000
Times interest earned ratio= 5544000/440000 = 12.6
For 20Y8,
Interest expense=$400,000
Income before income tax expense=$4,400,000
Times interest earned ratio= 4400000/400000 =11
As the times interest earned ratio for 20Y9 is greater than that for 20Y8,the change in the times interest earned ratio is favorable.
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