TIMES INTEREST EARNED Definition

Bookmark and Share

TIMES INTEREST EARNED (TIE) measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs. The TIE ratio is used by bankers to assess a firm's ability to pay their liabilities. TIE determines how many times during the year the company has earned the annual interest costs associated with servicing its debt. Normally, a banker will be looking for a TIE ratio to be 2.0 or greater, showing that a business is earning the interest charges two or more times each year. A value of 1.0 or less suggests that the firm is not earning sufficient amounts to cover interest charges.  Formula: Earnings Before Interest & Taxes [EBIT] / Interest Charges

Learn new Accounting Terms

TENDER is to offer a product for sale at a specified price. A tender is issued usually in response to a specific request from a potential purchaser, e.g. government procurement.

CONTINUITY ASSUMPTION see GOING CONCERN CONCEPT.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.