Embark on a journey of knowledge! Take the quiz and earn valuable credits.
Challenge yourself and boost your learning! Start the quiz now to earn credits.
Unlock your potential! Begin the quiz, answer questions, and accumulate credits along the way.
What is Interest Coverage Ratio mean?
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.
Times-Interest-Earned = EBIT or EBITDA Interest Expense {\displaystyle {\mbox{Times-Interest-Earned}}={\frac {\mbox{EBIT or EBITDA}}{\mbox{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 Company would then have to either use cash on hand to make up the difference or borrow funds. Typically, it is a warning sign when interest coverage falls below 2.5x.
referencePosted on 25 Sep 2024, this text provides information on Miscellaneous in Business related to Business. Please note that while accuracy is prioritized, the data presented might not be entirely correct or up-to-date. This information is offered for general knowledge and informational purposes only, and should not be considered as a substitute for professional advice.
Turn Your Knowledge into Earnings.
Ever curious about what that abbreviation stands for? fullforms has got them all listed out for you to explore. Simply,Choose a subject/topic and get started on a self-paced learning journey in a world of fullforms.
Write Your Comments or Explanations to Help Others