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Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest expense .
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
Net Operating Income = Adj. EBITDA = (Gross Operating Revenue) − (Operating Expenses) Debt Service = (Principal Repayment) + (Interest Payments) + (Lease Payments) [3] To calculate an entity's debt coverage ratio, you first need to determine the entity's net operating income (NOI). NOI is the difference between gross revenue and operating ...
Interest coverage ratio, or ICR, is used to evaluate a company’s ability to pay the interest it owes on its debts. There is no generally agreed upon standard for what makes a healthy ICR across ...
Debt-service coverage ratio (DSCR) looks at a company's cash flow versus its debts. ... (CFI) outlines the DSCR formula using EBITDA — short for earnings before interest, taxes, depreciation and ...
A company's times interest ratio indicates how well it can pay its debts while still investing in itself for growth. A higher ratio suggests to investors that an investment in the company is ...
A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by earnings before interest, taxes, depreciation and amortization and EBIT), and then determines the optimal use of debt versus equity (equity value).
A company that is capable of generating earnings well above its interest expense can withstand financial hardship. Companies such as Boot Barn (BOOT), AGCO Corporation (AGCO), KB Home (KBH) and ...