This times interest earned ratio calculator measures how many times a company can cover its interest expense with its operating earnings.
Finance
Times Interest Earned Ratio Calculator
Calculate the times interest earned ratio from EBIT and interest expense.
Calculator
About this calculator
Formula notes
Times interest earned = EBIT / interest expense, where EBIT is earnings before interest and taxes.
Worked examples
- Example: EBIT of 100,000 and interest expense of 20,000 gives a times interest earned ratio of 5.
- EBIT of 250,000 and interest expense of 50,000 gives a times interest earned ratio of 5.
How to use it
- Enter EBIT in the selected currency.
- Enter total interest expense.
- Read the coverage ratio and compare it with your lending threshold.
Frequently asked questions
What does a higher ratio mean?
A higher ratio generally means the company has more earnings available to cover interest, which lenders often view as lower risk.
What if interest expense is zero?
The calculator rejects zero interest expense because dividing by zero does not produce a meaningful coverage ratio.
Limits and interpretation
- The ratio uses EBIT, so non-operating income and tax effects are excluded from the coverage calculation.
- A single period ratio should be compared with industry norms and historical trends rather than treated as a fixed safety threshold.