The TIE ratio is a solvency measure: a company with a TIE of 6 could pay its interest six times over. Lenders often set minimum TIE covenants of 2–3×.
How to use the Times Interest Earned Ratio Calculator
- EBIT
- Total interest expense
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter EBIT and total interest expense.
Tips
- Check whether rates are quoted annually, semi-annually or per period.
- Bond prices and yields move in opposite directions – a higher yield means a lower price.
- Use the bond’s clean price (without accrued interest) for yield calculations.
- Credit ratios are most useful when tracked over several years.
Common mistakes to avoid
- Confusing the coupon rate with the yield.
- Using the face value instead of the market price.
- Forgetting that callable bonds may be redeemed before maturity.
Inputs explained
| Field | What to enter |
|---|---|
| EBIT | Amount in your currency |
| Total interest expense | Amount in your currency |
What each result means
- Times interest earned (TIE) ratio = [EBIT]÷[Total interest expense]
- EBIT cushion above interest = [EBIT] – [Total interest expense]
Example values
How the main result changes when EBIT changes and everything else stays at the example values above:
| EBIT | Times interest earned (TIE) ratio (×) |
|---|---|
| 900,000 | 3 |
| 1,350,000 | 4.5 |
| 1,800,000 | 6 |
| 2,250,000 | 7.5 |
| 2,700,000 | 9 |
| 3,600,000 | 12 |
Formula
TIE = earnings before interest and taxes ÷ total interest expenseWorked example
Inputs — EBIT: $1,800,000; Total interest expense: $300,000.
Results — Times interest earned (TIE) ratio = 6 ×; EBIT cushion above interest = $1,500,000.00.
Frequently asked questions
What is a good TIE ratio?
Above 2.5–3 is generally acceptable.
Is TIE the same as the interest coverage ratio?
Yes.
What does a TIE below 1 mean?
The company isn't earning enough to pay its interest.
What formula does the Times Interest Earned Ratio Calculator use?
TIE = earnings before interest and taxes ÷ total interest expense.