Times Interest Earned Ratio

Instructions: Use this Times Interest Earned Ratio to compute the Times Interest Earned Ratio \((TIER)\) with this calculator. You need to provide the Earnings Before Interest and Taxes \((EBIT)\) and the interest paid in the form below:

Earnings Before Interest and Taxes \((EBIT)\) =
Intertest =

Times Interest Earned Ratio Calculator

More about this times interest earned ratio calculator that will allow to get a step-by-step calculations.

Time Interest Earned Ratio Formula

The Times Interest Earned Ratio corresponds to the ratio between the EBIT and the interest. This ratio is a measure of long term solvency, and it indicates the number many times earnings can pay for the interest owed:

\[ TIER = \displaystyle \frac{EBIT}{\text{Interest}}\]
Times Interest Earned Ratio Calculation

Example: Calculation of Times Interest Earned Ratio

Question: Consider a firm that has earnings before interest and taxes of $43,000, and it has an interest due of $3,400. Compute the corresponding Times Interest Earned Ratio.


This is the information we have been provided with:

• The earnings before interest and taxes is \(EBIT = 43000\) and the interest \(Interest = 3400\).

Hence, the times interest earned ratio \(TIER\) is computed using the following formula:

\[ \begin{array}{ccl} TIER & = & \displaystyle \frac{EBIT}{\text{Interest}} \\\\ \\\\ & = & \displaystyle \frac{43000}{3400} \\\\ \\\\ & = & 12.65 \end{array} \]

Therefore, the times interest earned ratio, for the given earnings before interest and taxes of \(EBIT = 43000\), and interest of \(3400\), is equal to \(TIER = 12.65 \). This means that firm's earnings before interest and taxes are \(12.65\) times its due interest.

Calculation of Commonly Used Financial Ratios

The Times Interest Earned Ratio is a commonly used financial ratio in the study of corporate finance. You can find other financial ratio calculator in our site, such as our current ratio , quick ratio , inventory turnover calculator.

A tightly related profit ratio is the Cash Coverage Ratio , which usually reported along with the Times Interest Earned Ratio.

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