Times Interest Earned (TIE)

Definition of 'Times Interest Earned (TIE)'
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TIE, short for Times Interest Earned, is a ratio used to indicate a company’s ability to honor its debt obligations. The higher the TIE ratio, the more earnings it is able to devote to paying down debt. Conversely, lower TIE ratios—hovering somewhere around 1, 2, or 3—the less revenue it can devote to covering even the interest on those debts. To calculate the TIE ratio, divide the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) by its interest charges.