Question:
From the following information, calculate Interest Coverage Ratio:
Financial Information
Particulars Amount (₹) Profit after Tax 6,30,000 Tax Rate 30% 15% Debentures 20,00,000 Equity Share Capital 10,00,000
From the following information, calculate Interest Coverage Ratio:
Financial Information
| Particulars | Amount (₹) |
|---|---|
| Profit after Tax | 6,30,000 |
| Tax Rate | 30% |
| 15% Debentures | 20,00,000 |
| Equity Share Capital | 10,00,000 |
Show Hint
Always add back interest to Profit before Tax to get EBIT when computing Interest Coverage Ratio.
Updated On: Jul 7, 2025
Hide Solution
Verified By Collegedunia
Solution and Explanation
Interest = 15% of 20,00,000 = 3,00,000
Profit before Tax = Profit after Tax / (1 - Tax Rate) = 6,30,000 / 0.7 = 9,00,000
EBIT = Profit before Tax + Interest = 9,00,000 + 3,00,000 = 12,00,000
Interest Coverage Ratio = EBIT / Interest = 12,00,000 / 3,00,000 = 4 times
Was this answer helpful?
0
0
Top Questions on Accounting Ratios
- From the following information, calculate ‘Return on Investment’ :
Shareholders Funds ₹ 16,00,000
10% Debentures ₹ 8,00,000
Current Liabilities ₹ 2,00,000
Current Assets ₹ 5,00,000
Non-Current Assets ₹ 21,00,000
Net profit after tax was ₹ 3,00,000 and the tax amounted to ₹ 1,00,000.- CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
- Calculate opening and closing Trade Payables from the following information :
Total purchases ₹ 15,00,000;
Cash purchases are 25% of credit purchases;
Trade payables turnover ratio is 4 times;
Closing trade payables are two times of opening trade payables.- CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
- The Debt Equity Ratio of Manak Enterprises is 2.5 : 1. Which of the following transaction will result in increase in this ratio?
(A) Purchase of goods on credit ₹ 2,00,000.
(B) Payment to creditors ₹ 3,00,000.
(C) Issue of debentures ₹ 6,00,000.
(D) Sale of furniture of the book value of ₹ 4,00,000 at a profit of 10%.- CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
The following information has been obtained from the books of Gama Ltd.:
Particulars Amount (₹) Inventory 2,50,000 Total Current Assets 3,40,000 Shareholder’s Funds 10,00,000 12% Debentures 20,00,000 Net Profit Before Tax 9,60,000 Cost of Revenue from Operations 6,00,000 - CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
- Calculate Current Assets and Quick Assets of Beeta Ltd. from the following information:
- Quick Ratio = 0.75 : 1
- Current Liabilities = 6,00,000
- Revenue from Operations = 4,00,000
- Gross Profit Ratio = 20% of Revenue from Operations
- Inventory Turnover Ratio = 4 times
- Closing Inventory is 40,000 more than Opening Inventory
- CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
- Quick Ratio = 0.75 : 1
View More Questions
Questions Asked in CBSE CLASS XII exam
- The ends of six wires, each of resistance R (= 10 \(\Omega\)) are joined as shown in the figure. The points A and B of the arrangement are connected in a circuit. Find the value of the effective resistance offered by it to the circuit.
- CBSE CLASS XII - 2025
- Resistance and Resistivity
- “Christ, Sophie, you’re still at school.”
What image do you form of Geoff as a brother from the above context? (Going Places) - Your school is starting a ‘Mid Day Meal’ facility on a monthly payment basis. Write a notice informing students about the introduction of the same. Specify the charges (daily/monthly) and food items on the menu. Mention contact details for further information. Put your notice in a box.
Draw a rough sketch for the curve $y = 2 + |x + 1|$. Using integration, find the area of the region bounded by the curve $y = 2 + |x + 1|$, $x = -4$, $x = 3$, and $y = 0$.
- CBSE CLASS XII - 2025
- Integration
- A current carrying circular loop of area A produces a magnetic field \( B \) at its centre. Show that the magnetic moment of the loop is \( \frac{2BA}{\mu_0} \sqrt{\frac{A}{\pi}} \).
- CBSE CLASS XII - 2025
- Magnetic moment
View More Questions