A ratio that measures the firm's ability to meet its annual interest obligations is known as the _____.

Question

Quizplus · Accepted Answer

The times-interest-earned (TIE) ratio measures the ability of a firm to meet its annual interest obligations. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. A higher TIE ratio indicates a better ability to cover interest payments and a lower risk of default.

A Ratio That Measures the Firm's Ability to Meet Its