Times Interest Earned (TIE) Ratio

Times Interest Earned (TIE) ratio is used to determine how well a company can pay its debts with its present operating income. This is also known as the “Interest Coverage Ratio”.

To calculate TIE, you will need your company’s earnings before interest and taxes (EBIT) and your interest expense.

Times Interest Earned (TIE) Ratio = EBIT/Interest Expense

The higher your TIE ratio, the more cash your company will have left over once its debts have been repaid.