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From the following details calculate Interest Coverage Ratio: Net profit after tax - ₹ 7,00,000 6% debentures of ₹ 20,00,000 Tax Rate 30% |
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Answer» Net Profit Before Tax – Tax paid = Net Profit After Tax x – 30/100 (x) = ₹7,00,000 x = ₹ 7,00,000 (100/70) x = ₹ 10,00,000 Net Profit Before Tax = ₹ 10,00,000 Interest Payment = 6/100 (₹ 20,00,000) = ₹ 1,20,000 Earning Before Interest and Tax = Net Profit Before Tax + Interest Payment = ₹ 10,00,000 + ₹ 1,20,000 = ₹11,20,000 Interest Coverage ration `=("Earning Before Interest and Tax")/("Interest Expense ")` Interest Coverage Ratio `=₹11,20,000//₹ 1,20,000` Interest Coverage Ratio =9.33 times. |
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