What is time interest earned?

Times Earnesed is a way to measure the ability of the company to repay interest increasing from its loans. It expresses itself as an ratio that is calculated by obtaining the income of the company before interest and taxes and distributes it with the amount of interest owed. Also known as the ratio of interest coverage, Times Earnesed or Tie, provides investors the method of measurement of the financial stability of the company. Extremely low ratio means that the company does not have to take care of its interest payments in the short term and have capital in reserve for everyday operation or emergency expenses. The inability to repay the interest for any loans is a sign of weakness and may be a harbinger of possible insolvency for the company. The time gained is a ratio to show how many times the company can pay off its interest, which can be a good indicator of its short -term financial sounds. This number is then divided by the company's total due interest on all debts. Both numbers to be divided must come from the same predeterminedHim time period to make the calculation accurate.

For example, a company that accumulates earnings over a specific time period of $ 5,000 in the US (USD), which is the total amount that is the amount that has earned taxes and interest is discarded. In the same period of time, the interest that the company owes is $ 2,000. The $ 5,000 distribution of $ 2,000 by $ 2,000 results in an ratio of a 2.5 -interest rate interest. This basically means that the company can repay its interest obligations 2.5 times before capital.

While and the LPometer OW could be problematic, if it gets near the base level 1.0, there is no absolute benchmark number for an acceptable tie. Businesses in more volatile industries may require a high ratio to deal with potential rise and falls, while companies in Steatien Industries can get away with a lower score. It is also not necessarily a good thing,If society has an excessive time interest. This may mean that society has spent too much of its capital, rather than to grow society to grow society.