Times Interest Earned - TIE

Filed Under »
Dictionary Says

Definition of 'Times Interest Earned - TIE'

A metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy.

Also referred to as "interest coverage ratio" and "fixed-charged coverage."
Investopedia Says

Investopedia explains 'Times Interest Earned - TIE'

Ensuring interest payments to debt holders and preventing bankruptcy depends mainly on a company's ability to sustain earnings. However, a high ratio can indicate that a company has an undesirable lack of debt or is paying down too much debt with earnings that could be used for other projects. The rationale is that a company would yield greater returns by investing its earnings into other projects and borrowing at a lower cost of capital than what it is currently paying to meet its debt obligations.

Articles Of Interest

  1.

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.

  2. What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how check the score.

  3. Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies, or the boot for investors. Find out how to tell the difference.

  4. Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!

  5. Analyzing The Best Retirement Plans And Investment Options

    Understanding the various retirement investments - from annuities to 401(k)s and everything in between - is crucial to reaching your retirement goals. Here, we examined many of the popular investments ...

  6. Zero-Coupon Bond

    A zero-coupon bond or ‘no coupon’ bond is one that does not disburse regular interest payments. Instead, the investor buys the bond at a steep discount price; that is, at a price ...

  7. Climb The Bond Ladder To Higher Income

    Whether it's learning how to ladder bonds or finding alternatives, investors seeking better returns need to be more active.

  8. Guide To Embedded Options In Bonds

    Investors should be aware of embedded options that may be available in certain securities as these options may affect the value of the security.

  9. Helping Parents Advise Underage Investors

    This article looks at options for teenagers to prepare for their financial futures.

  10. Investment Choices For Wealthy People

    Here is an overview of some investment vehicles that are available to wealthy investors.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  2. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  3. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  4. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  5. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

  6. Chartalism

    A non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money.
Trading Center