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Times Interest Earned Ratio:
What does Interest Earned Ratio mean?
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.
Times interest earned = EBIT/I = Number of Times
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:-