Times Interest Earned Ratio (TIER) Calculator

A calculator to determine the times interest earned ratio based on earnings before interest and taxes.

Formula

$11700 / $10800 = 1.0833.The Times Interest Earned ratio for XYZ Corporation is 1.0833, based on earnings before interest and taxes (EBIT) of $11,700 and total interest paid of $10,800. This means that for every dollar of interest the company pays, it earns approximately $1.08 in EBIT, indicating a modest ability to meet interest obligations.

Meaning

The Times Interest Earned Ratio (TIER) is a financial metric that measures a company's ability to pay its interest expenses. It indicates how many times a company can pay off its interest payments from its earnings before interest and taxes (EBIT). A higher TIER ratio suggests that a company has a better ability to cover its interest expenses, which is generally considered a positive sign for the company's financial health.