What the Ratio Means for Investors When a company struggles with its obligations, it may borrow or dip into its cash reserves, a source forcapital assetinvestment or required for emergencies. Analyzing interest coverage ratios over time will often give a clearer picture of a company’s position ...
So the lower the ratio is, the more the company is burdened by its debt expenses. This in turn means that they have less capital that can be used in other ways. Let’s say a lender or investor was looking at a company’s interest coverage ratio and it was 1.5 or lower. They may ...
A higher interest coverage ratio is usually desirable because it means a company can better fulfill its financial obligations. But, this isn't always a hard-and-fast rule because this metric can be fluid. Higher ratios are better for companies and industries that are susceptible to volatility. ...
A ratio of a company'sEBITto its totalexpensesfrominterestpayments. The interest coverage ratio measures the company's ability to make interest payments, such as in itsdebt service. A ratio above one indicates that the company is able to pay its interest, while a ratio below one means that ...
Consolidated Interest Coverage Ratio means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Interest Charges for such period. Consolidated Adjusted EBITDA means, with respect to any ...
Interest Coverage Ratio means, as of the end of each fiscal quarter, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for the then-most recently concluded period of four consecutive fiscal quarters. Fixed Charge Coverage Ratio means with respect to any ...
As you can see, Tim has a ratio of ten. This means that Tim’s income is 10 times greater than his annual interest expense. In other words, Tim can afford to pay additional interest expenses. In this respect, Tim’s business is less risky and the bank shouldn’t have a problem accep...
With the help of the interest coverage calculator, it is very easy to calculate the interestcoverage ratioor times interest earned. You just need to find out three figures, i.e., EBIT, Interest Expenses, and Taxes, from theincome statementof an entity. It is one of the important financial...
Lower TIE Ratio→ On the other hand, a lower times interest earned ratio means that the company has less room for error and could be at risk of defaulting. Companies with lower TIE ratios tend to have sub-par profit margins and/or have taken on more debt than their cash flows could han...
A high TIE means that a company likely has a lower probability of defaulting on its loans, making it a safer investment opportunity for debt providers. Conversely, a low TIE indicates that a company has a higher chance of defaulting, as it has less money available to dedicate to debt repaym...