The times interest earned ratio measures the ability of a company to meet its interest obligations with resources from its proﬁt-making activities.

Question

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The times interest earned (TIE) ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses. It shows how many times a company's earnings can cover its interest expenses. A higher TIE ratio indicates that the company is more capable of meeting its interest obligations from its profits. Therefore, the statement is true.

The Times Interest Earned Ratio Measures the Ability of a Company