from the following interest coverage ratio Will be..
net profit after tax 3600000 ,10% Debentures 1000000, tax rate 40%.
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Answer:
Net Profit Before Tax – Tax paid = Net Profit After Tax
x – 30/100 (x) = ₹7,00,000
x = ₹ 7,00,000 (100/70)
x = ₹ 10,00,000
Net Profit Before Tax = ₹ 10,00,000
Interest Payment = 6/100 (₹ 20,00,000) = ₹ 1,20,000
Earning Before Interest and Tax = Net Profit Before Tax + Interest Payment
= ₹ 10,00,000 + ₹ 1,20,000
= ₹11,20,000
Interest Coverage ration =
Earning Before Interest and Tax/
Interest Expense
Interest Coverage Ratio =₹11,20,000/₹1,20,000
Interest Coverage Ratio =9.33 times.
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