Formula to calculate times interest earned:
Times Interest Earned Ratio = (net income + interest) / interest.
Times interest earned definition and explanation:
The times interest earned ratio indicates the extent of which earnings are available to meet interest payments.
A lower times interest earned ratio means less earnings are available to meet interest payments and that the business is more vulnerable to increases in interest rates.
The times interest earned ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
The times interest earned ratio is listed in our profitability ratios.