Times interest rate ratio formula
Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest expense. = When the interest coverage ratio is smaller than one, the company is not generating enough cash from its operations EBIT to meet its interest obligations. The interest coverage ratio can deteriorate in numerous situations, and you as an investor should be careful of these red flags. For instance, let's say that interest rates suddenly rise on the national level, just as a company is about to refinance its low-cost, fixed-rate debt.