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
- Calculate the amount of Opening Trade Receivables and Closing Trade Receivables from the following information:
Trade Receivables Turnover Ratio = 5 times
Cost of Revenue from Operations = ₹ 8,00,000
Gross Profit Ratio = 20%
Closing Trade Receivables were ₹ 40,000 more than Opening
Cash Sales = \( \frac{1}{4} \) of Credit Sales- CBSE CLASS XII - 2025
- Accountancy
- Accounting Ratios
- Calculate Opening and Closing Trade Receivables:
Trade Receivables Turnover Ratio = 5 times
Cost of Revenue = \₹ 8,00,000
Gross Profit Ratio = 20%
Closing TR = 40,000 more than Opening
Cash Sales = \( \frac{1}{4} \) of Credit Sales- CBSE CLASS XII - 2025
- Accountancy
- 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
View More Questions
Questions Asked in CBSE CLASS XII exam
- A coil of 60 turns and area \( 1.5 \times 10^{-3} \, \text{m}^2 \) carrying a current of 2 A lies in a vertical plane. It experiences a torque of 0.12 Nm when placed in a uniform horizontal magnetic field. The torque acting on the coil changes to 0.05 Nm after the coil is rotated about its diameter by 90°. Find the magnitude of the magnetic field.
- CBSE CLASS XII - 2025
- Magnetism and matter
- Determine the values of $x$ for which the function $f(x) = \frac{x-4}{x+1}$ is an increasing or a decreasing function.
- CBSE CLASS XII - 2025
- Application of derivatives
Complete and balance the following chemical equations: (a) \[ 2MnO_4^-(aq) + 10I^-(aq) + 16H^+(aq) \rightarrow \] (b) \[ Cr_2O_7^{2-}(aq) + 6Fe^{2+}(aq) + 14H^+(aq) \rightarrow \]
- CBSE CLASS XII - 2025
- Redox Reactions
- Two wires of the same material and the same radius have their lengths in the ratio 2:3. They are connected in parallel to a battery which supplies a current of 15 A. Find the current through the wires.
- CBSE CLASS XII - 2025
- Current electricity
- Arun, Bashir and Joseph were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. They admitted Daksh as a new partner who acquired his share entirely from Arun. If Arun sacrificed \( \frac{1}{5} \)th from his share to Daksh, Daksh's share in the profits of the firm will be :
- CBSE CLASS XII - 2025
- Partnership Accounts
View More Questions