Creditors are interested in the times interest earned ratio because they want to

Creditors are interested in the times interest earned ratio because they want to "have adequate protection against a potential drop in earnings jeopardizing their interest payments".


The times interest earned ratio is also known as interest coverage ratio, which measures the capacity of an association to pay its obligation commitments. The proportion is generally utilized by banks to discover whether an debt borrower can bear to assume any extra obligation. It might be figured as either EBIT or EBITDA divided by the aggregate interest which is payable.