## Times Interest Earned Ratio Calculator

A Times Interest Earned Ratio Calculator is a tool used to evaluate a company’s ability to meet its interest payment obligations. It measures the company’s ability to generate enough operating income to cover its interest expenses.

### Formula

The formula for calculating the Times Interest Earned Ratio is: Times Interest Earned Ratio = Earnings Before Interest and Taxes (EBIT) / Interest Expense.

### Example

For example, if a company has an EBIT of $500,000 and an interest expense of $100,000, the Times Interest Earned Ratio would be: Times Interest Earned Ratio = $500,000 / $100,000 = 5.

In this case, the company’s Times Interest Earned Ratio is 5, indicating that its operating income is sufficient to cover its interest expenses 5 times over. A higher ratio signifies better financial health and a lower risk of defaulting on interest payments.