~1 min read
What Is the Times Interest Earned Ratio?
Times Interest Earned (TIE) — also called the interest coverage ratio — measures how many times a company's EBIT can pay its interest obligations:
TIE = EBIT / Interest Expense
TIE Benchmarks
| TIE | Assessment |
|---|---|
| ≥ 5× | Strong coverage — comfortably serviceable |
| 3–5× | Adequate — lender-acceptable for most loans |
| 1.5–3× | Tight — approaching covenant limits |
| 1–1.5× | Minimal — one bad quarter puts you at risk |
| < 1× | Cannot cover interest from operations |
Why Lenders Care
TIE is a standard loan covenant metric. Most senior lenders require TIE ≥ 1.25–1.5×. A TIE of 3× means EBIT would have to drop 67% before interest payments become unserviceable.
TIE vs DSCR
TIE only covers interest, not principal repayment. For full debt service coverage including principal, use the DSCR Calculator. DSCR is stricter and more commonly used for real estate and project finance.