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From the following information calculate intereste …

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From the following information calculate intereste coverage ratio: net profit after interest and tax 120000; rate of income tax 40%; 15% debentures

Posted by Vivek Jadhav 4 years ago

CBSE > Class 12 > Accountancy

1 answers

Gaurav Seth 4 years ago

Question

Calculate interest coverage ratio and give your comments:

net profit after tax:120000

rate of income tax:40%

16% debentures Rs 100000

Answer:

Interest Coverage Ratio = Profit before Interest and Tax
Profit after Tax = Rs 1,20,000
Tax Rate = 40%
Value of 60% = Rs 1,20,000
Value of 40% = Rs 1,20,000/60%*40% = Rs 80,000

Profit after Interest but before Tax = Rs 2,00,000 (Rs 1,20,000+Rs 80,000)
Interest on Loan = Rs 15,000 (Rs 1,00,000*15%)
Profit before Interest and Tax = Rs 2,00,000+Rs 15,000 = Rs 2,15,000

Interest Coverage Ratio = Rs 2,15,000/16,000 = 13.4:1.

ANSWER

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