How to Calculate the Times Interest Earned Ratio


show more Calculating the times interest earned ratio provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis show less
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Calculating the times interest earned ratio

When a company borrows money to finance its operations, it must pay interest on those loans so the lender can make a profit on the transaction. The more money a company makes, the more comfortably it can handle those interest payments. The Times Interest Earned Ratio calculates the number of times a company could pays its yearly interest bill based on its earnings before interest and taxes. To calculate a company's Times Interest Earned Ratio, you divide Earnings Before Interest and Taxes or EBIT by the interest paid for the year. So, in this worksheet I have Earnings Before Interest and Taxes, Interest, and also Taxes.

Even though we don't use the Taxes figure in this formula, you'll usually find it on a worksheet or in an annual report along with the Interest and the EBIT, Earnings Before Interest and Taxes. But you don't need to worry. It's not used in the formula. To calculate the Times Interest Earned Ratio, you divide the Earnings Before Interest and Taxes by the ...

Calculating the times interest earned ratio
Video duration: 1m 49s 2h 18m Intermediate

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Calculating the times interest earned ratio provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis

Subject:
Business
Software:
Excel
Author:
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