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Marina86 [1]
2 years ago
6

In the following information, what is the times interest earned ratio?

Business
1 answer:
Ilya [14]2 years ago
7 0

Answer:

TIE = 150,000 / 5,000 = 30

Explanation:

Times Interest Earned (TIE) = Earnings Before Interest and Tax (EBIT) / Interest Expense

TIE ratio shows the ability of a company to meet its interest payments on its debt (solvency), expressed in times.  

In this case 3.33% of the operating profits goes towards servicing the debt or the operating income are 30 times the annual interest expense.

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