Wize University Introduction to Financial Accounting Textbook > Long-Term Liabilities
Times-interest-earned Ratio
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Times Interest Earned Ratio
The times interest earned ratio is a solvency ratio that measures a company's ability to pay its debt obligations.
- Measures how many times larger are earnings compared to interest expense.
- A high ratio indicates the company is not overburdened.
- A low ratio indicates that the company may have trouble paying its debt obligations.
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Example: Times Interest Earned Ratio
The following income statement was prepared at the end of December 31, 2020 by TRI, Inc.
Compute the times interest earned ratio for the year 2020.
Practice: Times Interest Earned Ratio
Compute the times interest earned ratio for the year 2020. Do not round your work, round your final answer to 2 decimal places and enter you answer in decimal form.
Compute the times interest earned ratio for the year 2019 and 2020
Do not round your work, round your final answer to 2 decimal places and enter you answer in decimal form.