What is times interest earned? What does TIE stand for?
Times Interest Earned (TIE), also called the “fixed charge coverage” or “interest coverage ratio,” is a measure of a company’s ability to pay its debt obligations.
TIE is calculated by dividing a company’s Earnings Before Interest and Taxes (EBIT) by the total interest payable on its debt, including bonds. The ratio computed reveals how many times over a company can pay its interest obligations with pretax earnings.
Somewhat counterintuitively, too high a TIE (meaning a company can very easily cover its interest payments) is not always considered beneficial because a company may have very low debt due to a lack of investment in projects that could yield higher returns than the costs of carrying debt.