Question

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​

Answer 1

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