The earning power of Pankaj Ltd is 30. If the average of total assets and interest expenses are Rs.200000 and Rs.15000 respectively. What will be the interest coverage ratio?
Answers
Answered by
1
answer:
8 : 1 is interest coverage ratio
Answered by
6
Answer: 4:1
Explanation: Earning Power Ratio = EBIT ÷ Average Total Asset
30% = EBIT ÷ 200000
EBIT = 200000 × 30%
Therefore, EBIT = 60000
Then,
Interest Coverage Ratio = EBIT ÷ Interest
= 60000 ÷ 15000
Hence, Interest Coverage Ratio = 4:1
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