TIMES INTEREST EARNED Definition

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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

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ACRS is Accelarted Cost Recovery System.

IMPLICIT RATE OF INTEREST is when the stated interest rate is not indicative of the market rate at the time a note is negotiated, the value of the asset (cash or non-cash) or service exchanged for the note establishes the market rate.

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