Investopedia

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. 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 ...
  6. 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.
  7. 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.
  8. Helping Parents Advise Underage Investors

    This article looks at options for teenagers to prepare for their financial futures.
  9. Investment Choices For Wealthy People

    Here is an overview of some investment vehicles that are available to wealthy investors.
  10. Understanding Social Impact Bonds

    Social impact bonds are powerful investment vehicles for the solving of social issues in a sustainable fashion.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Abatement Cost

    A cost borne by many businesses for the removal and/or reduction of an undesirable item that they have created.
  2. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.
  3. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.
  4. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.
  5. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  6. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
Trading Center