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Times Interest Earned Ratio Calculator

Calculate the ratio of operating earnings to interest obligations.

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Calculation Parameters

Specify your inputs below.

Earnings Before Interest & Taxes (EBIT) ($)

Interest Expense ($)

Calculated Result

TIE Ratio 5.00

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Expert Tip

The TIE ratio evaluates solvency. Creditors typically require a ratio above 2.0-3.0 for loan approvals.

How this Calculator Works

This calculator computes the Times Interest Earned (TIE) Ratio. TIE is identical to the interest coverage ratio, highlighting corporate solvency by showing how many times operating income can cover interest liabilities.

Formula & Methodology

TIE Ratio = EBIT / Interest Expense - EBIT is the Earnings Before Interest and Taxes. - Interest Expense is the total annual interest expense.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A business has EBIT of $180,000 and interest liabilities of $45,000. 1. Divide EBIT by interest: $180,000 / $45,000 = 4.0. Result: The Times Interest Earned Ratio is 4.0.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This fixed income and debt investment calculator analyzes bond pricing, coupon yield to maturity (YTM), Macaulay/modified duration, credit risk spreads, and debt coverage ratios based on Wall Street fixed income analytics.

Variable Glossary

Input

Fixed Income Data

Par value ($1,000), coupon rate %, payment frequency, maturity years, corporate credit spread, or tax rate %.

Parameter

Bond Performance

Yield to Maturity (YTM %), present bond price ($), modified duration (years), or Tax-Equivalent Yield (TEY).

How to Calculate Step-by-Step

Step 1

Input bond face value, annual coupon interest rate, or corporate credit default swap (CDS) basis points.

Step 2

Select payment schedule frequency (annual, semi-annual) and years remaining until maturity date.

Step 3

Review calculated yield to call/maturity, interest rate sensitivity duration, or debt service coverage (DSCR).

FAQ

How does bond duration measure interest rate risk?

Modified duration estimates the approximate percentage change in a bond's price for a 1% (100 bps) shift in interest rates. Higher duration indicates greater price sensitivity to rate moves.

What is Tax-Equivalent Yield (TEY) for municipal bonds?

Tax-Equivalent Yield = Municipal Tax-Exempt Yield / (1 - Marginal Tax Rate). It shows the pre-tax yield a taxable bond would need to equal the after-tax yield of a tax-free municipal bond.

Can fixed income calculators guarantee bond trading outcomes?

No. Bond pricing models assume clean compounding yields and fixed reinvestment rates. Secondary market prices fluctuate based on liquidity, credit rating revisions, and market interest rate movements.