CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What is times interest earned?

Times interest earned

Times interest earned (TIE) evaluates the creditworthiness of a business. It’s a way of measuring a company’s ability to pay off the interest accruing on its loans, and is expressed as a ratio. For instance, if the ratio is 3.0, the company has enough income to pay its interest obligations three times over.

Where have you heard about times interest earned?

TIE helps investors appraise a company’s financial stability. Borrowing money is a necessity for most businesses to facilitate growth, but an inability to pay off the interest accrued on any loans is a red flag warning that insolvency may be on the horizon.

What you need to know about times interest earned.

To calculate TIE, you take earnings before interest and taxes and divide that figure by the total interest payable on bonds and other contractual debt.

Generally speaking, the higher the figure, the better equipped a company is to meet its interest payments. A very high ratio isn’t necessarily a good thing, however, as it might suggest a company has spent too much of its capital paying off debt with earnings that could have been used for other projects or investments to expand the business.

Find out more about times interest earned.

Read our definition of debt ratio for more information on measuring company stability.

Related Terms

Latest video

Latest Articles

View all articles

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading