Interest = 20 percent of 10,00,000 = 2,00,000.
Net Profit Before Tax = NPAT / (1 - Tax rate) = 6,00,000 / 0.60 = 10,00,000.
NPBIT = NPBT + Interest = 10,00,000 + 2,00,000 = 12,00,000.
Interest Coverage Ratio = NPBIT / Interest = 12,00,000 / 2,00,000 = 6 times.
What will be Interest Coverage Ratio, when 20% Long term Debt is Rs. 10,00,000, Tax Rate 40% and Net profit After Tax is Rs. 6,00,000.
CUET UG 2023 — Accountancy Financial Statements
What will be Interest Coverage Ratio, when 20% Long term Debt is Rs. 10,00,000, Tax Rate 40% and Net profit After Tax is Rs. 6,00,000.
Held on 11 Jun 2023 · Verified 13 Jul 2026.
Options
- A
5.4 Times
- B
4 Times
- C
6 Times
- D
5.6 Times
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