Question

from the following information calculate interest coverage ratio net profit after tax 700000 6%debentures 20,00,000 tax rate of 30%​

Answer 1

Solution

Net Profit Before Tax – Tax paid = Net Profit After Tax <br> x – 30/100 (x) = ₹7,00,000 <br> x = ₹ 7,00,000 (100/70) <br> x = ₹ 10,00,000 <br> Net Profit Before Tax = ₹ 10,00,000 <br> Interest Payment = 6/100 (₹ 20,00,000) = ₹ 1,20,000 <br> Earning Before Interest and Tax = Net Profit Before Tax + Interest Payment <br> = ₹ 10,00,000 + ₹ 1,20,000 <br> = ₹11,20,000 <br> Interest Coverage ration

<br> Interest Coverage Ratio

<br> Interest Coverage Ratio =9.33 times.

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