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Times-Interest-Earned Ratio

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Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments.

Times-Interest-Earned Ratio
A measure of a company's ability to service its debts. It is calculated by dividing the company's earnings before interest and taxes by the total interest payable on its debts, expressed as a ratio. Investors prefer publicly-traded companies to have a middling times-interest-earned ratio. A low ratio indicates an inability to service debts, while a high ratio indicates a lack of debt that investors may find undesirable.


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