Times Interest Earned Calculator
**This is a basic calculator and does not accept commas. When entering values, just enter the numbers.
Times Interest Earned Ratio Formula
**Note this ratio is also referred to as Interest Coverage Ratio.
Times Interest Earned Ratio =
(Net Income + Income Tax Expense + Interest Expense) / Interest Expense
** This formula is also represented as EBIT / Interest Expense. EBIT is Earnings Before Interest and Taxes, which is the same as Net Income + Income Tax Expense + Interest Expense.
(Net Income + Income Tax Expense + Interest Expense) / Interest Expense
** This formula is also represented as EBIT / Interest Expense. EBIT is Earnings Before Interest and Taxes, which is the same as Net Income + Income Tax Expense + Interest Expense.
What Does Times Interest Earned Mean?
The times interest earned ratio is used in accounting to evaluate how well a business will be able to pay its interest expense. While the Debt Ratio and Debt to Equity Ratio are used to evaluate the debt of a business, neither provide insight on its ability to pay interest expenses. This ratio is a measure of the number of times EBIT (earnings before interest and taxes) covers interest expenses. As with most accounting ratios, it is important to evaluate this measure by industry, as different industries carry different "norms."