# What Does Tie Ratio Mean?

## What is a good tie ratio?

An organization with a times interest earned ratio greater than 2.5 is considered an acceptable risk by investors and creditor’s. Companies that have a times interest earned ratio of less than 2.5 are more likely to be in financial trouble.

## What does a high tie ratio mean?

The number of times a company can cover its interest expenses is measured by the TIE. It’s not worth it for a company to be able to pay their debts more than once if the ratio is high.

## Is lower tie ratio better?

A high TIE means that a company is less likely to default on its loans, which is a safer investment opportunity for debt providers. A low TIE indicates that a company has less money available to devote to debt repayment and thus is more likely to default.

## What does a low tie ratio mean?

Less earnings are available to meet interest payments if the times interest earned ratio is low. If the company fails to meet its obligations, it could be forced into bankruptcy.

## What is a good quick ratio?

A quick ratio of more than 1.0 is a good one. If your business has a quick ratio greater than 1.0, it means you can pay your debts. The better off your business is if you have a number.

## What is a good return on equity?

A good return on equity is something to think about. The better your return on equity is, the more it will benefit you. It’s important for investors to see a high ROE because it shows that the business is using funds well. It is considered good if the return on equity is 15 to 20%.

## What is a good return on assets?

What is considered to be a good return on investment? Good and excellent are the terms used to describe a return on investment of over 5%. It’s always a good idea to compare ROAs between firms in the same sector.

## How is tie ratio calculated?

We take the operating income and divide it by the interest expense to calculate the time interest earned ratio. Company A’s TIE ratio in Year 0 is \$100 million divided by \$25 million, which comes out to 4.0x.

## What does cash coverage ratio tell you?

The cash coverage ratio can be used to determine the amount of cash available to pay the interest on the loan.

## Can you have a negative times interest earned ratio?

Is it possible to have a negative time interest earned ratio? The times interest earned ratio would be negative if you were to report a net loss. If you have a net loss, the times interest earned ratio may not be the best one to use.

## Is a quick ratio of 2.5 good?

The current ratio for Company ABC is 2.5, which means that it has 2.5 times its liabilities in assets and is able to meet its financial obligations.

## What is a good average collection period?

If your average collection period is less than 45 days, that is problematic. If you have an average collection period of less than 30 days, that is positive.

## What if the quick ratio is too high?

Some of your money is not being put to work if the quick ratio is too high. This shows inefficiency that can hurt your company’s profits.

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