Question

Net profit (after tax) ₹70,000
Fixed interest charges on debentures ₹10,000
Income tax paid₹70,000
Find interest coverage ratio??

Answer 1

Answer:

Interest coverage ratio = net profit before Interest and tax / fixed interest charge

net profit after tax = 70000

(+) tax. = 70000

net profit before tax = 140000

(+) interest = 10000

Net profit before Interest and tax = 150000

so ratio = 150000/10000= 15 times