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Times Interest Earned (TIE) Ratio

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The Hr Picket Corporation has a $500,000 of debt out standing and it pays an interest rate of 10% annually. Pickets annual sales are 2 Million dollars and its average tax rate is 30% and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 times its bank will refuse to renew the loan and bankrupts will result. What is Pickets TIE?

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The solution calculates Times Interest Earned (TIE) Ratio.

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The Times Interest Earned (TIE) Ratio= Profit before Interest and Taxes/Total Interest ...

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