Times Interest Earned Ratio

Online Calculators for Business & Investment

Times Interest Earned Ratio

The Times Interest Earned Ratio is a leverage ratio that is slightly different to the previous. It is purely a risk measure and the calculation tells us how many times over a company’s earnings, specifically its earnings before interest and tax (EBIT), can be used to meet its interest payments.

It is used as a risk measure because it explains how easily (or not) a business can service its debts. The higher the ratio, the more times over its EBIT can meet its interest expense, the easier it can service its debt and the safer a business appears to be.

The measurement simply represents how many times over a company’s EBIT (Income Before Tax plus Interest Expense) covers its interest expense. That is, a result of 5.6 means there is 5.6 times EBIT than there is interest expense.

Times Interest Earned Ratio Calculator

The calculator asks for:
Income Before Tax, which is found in the Income Statement.
Interest Expense, which is also found in the Income Statement.

Income Before Tax ($):

Interest Expense ($):

Times Interest Earned Ratio:

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