Which financial ratio measures how many times a company’s operating income (EBIT) covers its annual interest payments?
ATimes Interest Earned (TIE) Ratio
BCurrent Ratio
CEquity Multiplier
DDebt Service Coverage Ratio (DSCR)
Explanation
* Times Interest Earned (TIE) = Operating Income (EBIT) / Annual Interest Expense.
* Evaluates corporate debt servicing capacity and credit risk burden.
* Higher TIE ratio reflects lower default risk for debtholders.
Exam Relevance
- Topic: Financial Analysis
- Subtopic: Coverage Ratios
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