Question

Calculate intrset coverage ratio profit aftr tax and intrst is 497000 rate of income tax is 30% 12% debentures 600000

Answer 1

                                                                     

W.note 1  

Profit before interest and tax

Less : Interest                           72000

Profit before tax (100%)         7,10,000      

Less : Income tax (30%)          2,13,000  

Profit After tax   (70%)              4,97,000

W.no 2

Income tax = 497000 *( 30% / 70%)

                   = 213000

W.no 3

Profit before tax = 497000+213000

                            =710000

           or

                          = 497000* (100% / 70%)

                          =710000

W.note 4

Interest on debenture = 600000* 12%

                                       =72000

Profit before tax and interest  = Profit after tax and interest - Interest

                                                            - income tax

                                                   = 710000 - 72000 - 213000

                                                   =425000

Interest coverage ratio = profit before interest and tax / interest expenses

                                       =425000 / 72000    

                                        =5.902      

Interest coverage ratio = 5.902