🏗️Solvency Ratios

Times Interest Earned

Income Before Interest & Taxes ÷ Interest Expense = Times Interest Earned

What It Means

How many times over can you cover interest payments?

✓Higher = easier to cover interest payments

EBIT:$100,000

Interest Expense:$20,000

$100,000 ÷ $20,000

Times Interest Earned = 5

→ Can cover interest 5 times over—comfortable

Total Liabilities ÷ Total Assets × 100 = Debt Ratio %

Total Liabilities ÷ Total Equity = Debt-to-Equity Ratio

Total Assets ÷ Total Equity = Equity Multiplier

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