About Times Interest Earned Ratio Calculator (Formula)
The Times Interest Earned Ratio (TIE) calculator is a tool used to measure a company’s ability to meet its interest payments on its outstanding debt. The TIE ratio is calculated by dividing the company’s earnings before interest and taxes (EBIT) by its annual interest expenses. The formula for calculating the TIE ratio is:
TIE Ratio = (EBIT) / (Interest Expenses)
Where:
- EBIT is the company’s Earnings Before Interest and Taxes
- Interest Expenses is the company’s annual interest expenses
A TIE ratio of 1.5 or higher is considered to be healthy, indicating that the company is generating enough income to meet its interest payments. A TIE ratio of less than 1.5 indicates that the company is not generating enough income to meet its interest payments and may be in financial trouble.
TIE ratio calculators are commonly used in finance and accounting to quickly and easily calculate the TIE ratio for a given company. They can be found in spreadsheet software or as online calculators, and can be used to calculate the TIE ratio for a company based on its EBIT and interest expenses.