Can someone explain what "times interest earned ratio" is with a numeric example?

Answer 1

Times interest earned alson known as "interest coverage ratio" is used by analysts to determine how streched out the companies finances are. How much money a company has after operating expenses but before taxes is left over to pay any debt and how many times that debt can they cover. (Like a buffer or reserve).

Example:

You make $2000 a month in wages.
Your living expense (food,clothes,rent) is $1000 a month.
Your car "loan" payment is $300 a month.

Income(2000) - Operating Expenses(1000) = $1000 net before tax.

That $1000 divided by $300 in debt payments = 3.33 times

3.33 is your debt coverage ratio.

Answer 2

ya ... [makes this up on the fly]

data:

Sales 100 000
CoGS 55 000

Gross Margin 45 000

selling exp 15 000
G & A 15 000
occupancy 5 000

net margin 10 000

interest exp 5 000

pre-tax income 5 000

taxes 1 500

net income 3 500

times interest earned = net margin divided by interest expense = 2.0 in this example.

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