20. From the following information, calculate interest coverage ratio :Net Profit after Interest and Tax 720000Rate of Income Tax 40%12% Debentures 200000010% Mortgage Loan 600000
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Answer:
Interest coverage ratio =
Net profit before interest & tax/ fixed interest charge
Net profit after interest &tax= 720000
(+) tax =. 720000×. 40/60 =480000
net profit before tax. = 12,00,000
(+) interest. =
20,00,000×12%=240000
.600000×10%. =60000. =300000
net profit before interest &tax = 15,00,000
Interest coverage Ratio = 1500000/300000
=. 5times
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