Times-interest-earned ratio
Times-interest-earned ratio (alternatively spelled times interest earned ratio and known as TIE ratio) is the ratio that is determined by dividing earnings before interest and taxes by the debt interest charges. This ratio measures the extent to which operating income can decline before the firm is unable to meet its debt interest costs.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Times-interest-earned ratio (TIE ratio). Determined by dividing earnings before interest and taxes by the interest charges. This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Times-interest-earned ratio (TIE ratio). The ratio of earnings before interest and taxes EBIT to interest charges; a measure of the firm's ability to meet its annual interest payments.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Times-interest-earned ratio. Ratio of income from operations to interest expense. It measures the number of times operating income can cover interest expense; also called the interest-coverage ratio.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
