Times Interest Earned (TTM)
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Also known as the "Interest Coverage Ratio."
Times interest earned is a key metric to determine the credit worthiness of a business. Essentially, the number represents how many times the last 12 months' EBIT (earnings before interest and taxes) would have covered the past 12 months' interest expenses.
This ratio works well when looking at manufacturing businesses, utilities, and certain service businesses. It should be used with care when analyzing financial service companies because their business models borrow differently from traditional manufacturing and service businesses.
Formula
Times Interest Earned (TTM) = TTM Earnings Before Interest and Taxes / (TTM Operating Interest Expense + TTM Non Operating Interest)
(Where TTM means trailing 12 months)
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