Times Interest Earned (TIE) Ratio Calculator

Your details

Choose whether you already know EBIT or want to derive it from revenue and operating costs.
Operating profit before interest and tax charges. Found on the income statement.
USD
Total interest owed during the period, including on loans, bonds, and other debt.
USD
The TIE ratio you want to achieve. The calculator shows the EBIT needed to hit it.
Times Interest Earned (TIE)Very Strong
5

How many times EBIT covers the interest bill

Coverage Margin600,000USD
EBIT Needed for Target TIE450,000USD
Interest as % of EBIT0.2%
5 x
Distress<1High Risk1-1.5Marginal1.5-2Adequate2-3Strong3-5Very Strong5+

Your TIE ratio is 5.00, very strong. EBIT covers interest expenses more than 5 times over.

  • Your EBIT exceeds interest by $600,000, the buffer that absorbs earnings downturns before default risk rises.
  • Interest consumes 20.0% of EBIT. The lower this share, the more earnings are available for reinvestment, taxes, and dividends.
  • To hit a TIE of 3.0x, you need EBIT of $450,000, a reduce of $300,000 from today.
  • TIE uses EBIT, not operating cash flow, so it can overstate coverage for businesses with large non-cash charges. Pair it with a cash-flow-based debt service coverage ratio for a fuller picture.

Next stepBenchmark this ratio against industry peers over several periods to track whether coverage is improving or deteriorating.

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