Question : From the following information calculate interest coverage ratio: Net Profit after tax Rs. 1,20,000; 15% Long-term debt 12,00,000; and Tax rate 40%.
Option 1: 3 times
Option 2: 2 times
Option 3: 1.67 times
Option 4: 1.50 times
Correct Answer: 1.67 times
Solution : Net Profit after Tax = Rs. 80,000 Tax Rate = 40% Net Profit before tax = Net profit after tax × 100/ (100 − Tax rate) = Rs. 1,20,000 × 100/(100 − 40) = Rs. 2,00,000 Interest on Long-term Debt = 15% of Rs. 12,00,000 = Rs. 1,80,000 Net profit before interest and tax = Net profit before tax + Interest = Rs. 1,20,000 + Rs. 1,80,000 = Rs. 3,00,000 Interest Coverage Ratio = Net Profit before Interest and Tax/Interest on long-term debt = Rs. 3,00,000/Rs. 1,80,000 = 1.67 times Hence option c is the correct answer.
Question : Net Profit after tax Rs.6,00,000
Rs.40,00,000, 12% Debentures of Rs. 100 each.
The tax Rate of 40% interest coverage ratio of the company will be _______.
Option 1: 3.07 times
Option 2: 3 times
Option 3: 3.80 times
Option 4: 3.08 times
Question : ---------- ratio is calculated by dividing the ‘profit before charging interest and income-tax’ by ‘fixed interest charges.
Option 1: Net profit ratio
Option 2: Operating profit ratio
Option 3: Fixed assets turnover ratio
Option 4: Interest coverage ratio
Question : Which of the following statements is true?
Option 1: Net Profit after tax means Net Profit after interest and tax
Option 2: Net Profit after tax means Net Profit after interest and before tax
Option 3: Net Profit after tax means Net Profit before interest and after tax
Option 4: Net Profit after tax means Net Profit before interest and before tax
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