Question

(a) Calculate interest Coverage ratio from the following details :
Rs.
10% Debentures2,00,000
9% Loan from Bank1,50,000
10% Public deposits1,25,000
Net Profit after tax @50%1,38,000

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Answer 1

Answer: 7 Times

Explanation: Explanation: Interest Coverage Ratio= EBIT/Interest  ,[where EBIT is Earning before Interest and Tax].

Earnings before Tax= Net Profit After Tax*100/50

                                  = ₹1,38,000*2

                                  = ₹2,76,000

Now,

EBIT = EBT + Interest Paid

       = ₹2,76,000 + 10%of ₹2,00,000+ 9%of ₹1,50,000+ 10%of ₹1,25,000

       = ₹3,22,000

So, ICR = EBIT/Interest

           = ₹3,22,000/₹46,000

           = 7 Times.