Formula To Calculate Times Interest Earned Ratio (TIE) :

TIE measures how easily a firm can pay its debts with its current income.

To calculate the Times Interest Earned Ratio(financial), use the following formula

Times Interest Earned = EBIT / Interest Expense

Where

EBIT - Earnings before Interest and Taxes

Example :

Company XYZ has an EBIT of $4,000 and interest expense of $2,000.

Times Interest Earned = (4000/2000) = 2

Therefore, this company XYZ has a times interest earned of 2, meaning that Company XYZ income is 2 times greater than the annual interest expense.