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1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Times Interest Earned (TIE)

Financial Accounting

14. Financial Statement Analysis

Ratios: Times Interest Earned (TIE)

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Multiple Choice

The Times Interest Earned (TIE) ratio is calculated by dividing EBIT by which of the following?

Total liabilities

Interest expense

Total assets

Net income

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Verified step by step guidance

Understand the Times Interest Earned (TIE) ratio: It measures a company's ability to meet its interest obligations using its earnings before interest and taxes (EBIT).

Identify the formula for TIE ratio: The formula is \( \text{TIE} = \frac{\text{EBIT}}{\text{Interest Expense}} \).

Clarify the components: EBIT stands for Earnings Before Interest and Taxes, and Interest Expense refers to the cost incurred by the company for borrowed funds.

Determine the denominator: The denominator in the TIE ratio is Interest Expense, as it represents the amount the company needs to cover with its earnings.

Review the options provided: The correct answer is Interest Expense, as it aligns with the formula \( \text{TIE} = \frac{\text{EBIT}}{\text{Interest Expense}} \).