Times interest earned or (TIE), also known as interest coverage ratio. It is the measure of a firm’s capacity to honor its debt payments. It may be calculated as either EBIT or as EBITDA when divided by the total interest payable.
Formula
Times interest earned = EBIT/I = Number of Times
Example
Lee’s statement shows $50,000 in income before interest expenses and taxes. The firm’s overall interest and debt service for a year are amounted to $5,000.
According, to the formula, Times interest earned is:-
$50,000 / $5,000 = 10 Times
Created: Jun 10, 2018
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