what is the times interest earned tie ratio 
the times interest earned tie ratio is a solvency ratio that determines how well a company can pay the interest on its business debts it is a measure of a company s ability to meet its debt obligations based on its current income the formula for a company s tie number is earnings before interest and taxes ebit divided by the total interest payable on bonds and other debt the result is a number that shows how many times a company could cover its interest charges with its pretax earnings tie is also referred to as the interest coverage ratio investopedia julie bangformula and calculation of the times interest earned tie ratioassume for example that xyz company has 10 million in 4 debt outstanding and 10 million in common stock the company needs to raise more capital to purchase equipment the cost of capital for issuing more debt is an annual interest rate of 6 the company s shareholders expect an annual dividend payment of 8 plus growth in the stock price of xyz the business decides to issue 10 million in additional debt its total annual interest expense will be 4 x 10 million 6 x 10 million or 1 million annually the company s ebit is 3 million this means that the tie ratio for xyz company is 3 or three times the annual interest expense 