Sitemap

Times interest earned – cash basis definition

Description

Time interest earned – cash basis is very similar to TIE. The only difference is that this ratio is calculated relying on the background of cash flow as TIE is calculated relying on EBIT. Data to calculate this ratio is collected from cash flow statement.

The same as TIE, time interest earned – cash basis ratio is important for company’s creditors.  

Norms and limitations

There are no general norms for this ratio.

It is recommended to compare this ratio with the ratios of companies working within the same industry.

Formula

Adjusted operating cash flow equals cash flow from operations plus fixed charges plus tax payments.

Interest expense shows how much a company must pay for the money they borrowed from banks and other creditors.