Advertisements
Advertisements
प्रश्न
From the following information, calculate the Interest Coverage Ratio:
Net profit after interest and tax ₹ 1,20,000; Rate of income tax; 40%; 15% Debentures ₹ 1,00,000; 12% Mortgage loan ₹ 1,00,000.
Advertisements
उत्तर
Calculation of Total Interest Expense:
\[\text{Interest on Debentures} = ₹ 1,00,000 \times 15\% = ₹ 15,000\]
$$\text{Interest on Mortgage Loan} = ₹ 1,00,000 \times 12\% = ₹ 12,000$$
$$\text{Total Interest} = ₹ 15,000 + ₹ 12,000$$
$${\text{Total Interest} = ₹ 27,000}$$
Calculation of Net Profit before Tax:
$$\text{Net Profit before Tax} = \frac{\text{Net Profit after Tax}}{1 - \text{Tax Rate}}$$
$$\text{Net Profit before Tax} = \frac{1,20,000}{1 - 0.40} = \frac{1,20,000}{0.60}$$
$${\text{Net Profit before Tax} = ₹ 2,00,000}$$
Calculation of Net Profit before Interest and Tax:
$$= \text{Net Profit before Tax} + \text{Total Interest}$$
$$ = ₹ 2,00,000 + ₹ 27,000$$
$${= ₹ 2,27,000}$$
Calculation of Interest Coverage Ratio:
$$\text{Interest Coverage Ratio} = \frac{\text{Net Profit before Interest and Tax (EBIT)}}{\text{Total Interest}}$$
$$\text{Interest Coverage Ratio} = \frac{2,27,000}{27,000} \approx 8.4074$$
Interest Coverage Ratio = 8.41 Times
