The times interest earned ratio is computed by dividing

Step 1: Define the Problem

Identify the formula and components needed to compute the times interest earned (TIE) ratio.

Step 2: Break Down the Problem

The TIE ratio is a financial metric used to measure a company's ability to meet its debt obligations. It is calculated by dividing a specific financial figure by the interest expense.

Step 3: Apply Relevant Concepts

The formula for the times interest earned ratio is: $\text{Times Interest Earned Ratio} = \frac{\text{Earnings Before Interest and Taxes (EBIT)}}{\text{Interest Expense}}$

Step 4: Analysis, Verify and Summarize

• Earnings Before Interest and Taxes (EBIT): This is the company's profit before deducting interest and taxes. It reflects the company's operational profitability.
• Interest Expense: This is the cost incurred by the company for borrowed funds.

Final Answer

The times interest earned ratio is computed by dividing the Earnings Before Interest and Taxes (EBIT) by the Interest Expense.