This essay focuses on Times Interest Earned ratio. The times interest earned ratio indicates the company’s ability to meet the current year’s interest

Times Interest Earned ratio

The debt-to-equity ratio is a measure of the company’s overall long-term financial health. Management must also be aware of its ability to meet current interest payments to creditors. The times interest earned ratio indicates the company’s ability to meet the current year’s interest payments out of the current year’s earnings:
Both interest expense and income tax expense are add back to net income in the numerator because interest is a deduction in arriving at the amount of income subject to tax. If a company had just enough income to cover the payment of interest, tax expense would be zero. As far as lenders are concerned, the greater the interest coverage, the better. Bankers often place more importance on the times interest earned ratio than on earnings per share.

• Earned Income is wages, net earnings from self–employment, certain royalties, honoraria, and sheltered workshop payments.
• Unearned Income is all income that is not earned such as Social Security benefits, pensions, State disability payments, unemployment benefits, interest income, dividends and cash from friends and relatives.
• In-Kind Income is food, shelter, or both that you get for free or for less than its fair market value.
• Deemed Income is the part of the income of your spouse with whom you live, your parent(s) with whom you live, or your sponsor (if you are an alien), which we use to compute your SSI benefit amount.

WHY IS INCOME IMPORTANT IN THE SSI PROGRAM?

Generally, the more countable income you have, the less your SSI benefit will be. If your countable income is over the allowable limit, you cannot receive SSI benefits.