The times interest earned ratio is a measurement of EBIT (Earnings before Interest and Taxes) to the company’s interest expense.
Times Interest Earned = EBIT / Interest Expense
A company has an EBIT of $3,000 and interest expense of $3,000.
Times Interest Earned = $3,000 / $3,000 = 1.000
Therefore, this company has a times interest earned of 1.000.
- NASDAQ – Times-interest-earned ratio – A one line definition of times interest earned.
- Accounting Tools – Times interest earned ratio – A summary of times interest earned, including the formula and a sample calculation.
- Wikipedia – Times interest earned – Wikipedia’s entry on times interest earned.
- Investopedia – Times Interest Earned – TIE – An introduction article to TIE.