Question

From the following information, calculate Interest Coverage Ratio: Profit after Tax ₹1,70,000; Tax ₹30,000; Interest on Long-term Funds ₹50,000.

Answer 1

Profit before Interest and Tax = Profit after Tax + Tax +Interest

= 1,70,000 + 30,000 + 50,000 = 2,50,000

Interest Coverage Ratio

= `"Net profit before Interest and Tax"/"Interest"`

`= 250000/50000 = 5  "times"`