Given:
- Net Profit after tax = Rs. 50,000
- Tax rate = 20%
- 15% Long-term debt = Rs. 12,00,000
The relationship between Net Profit after tax and Net Profit before tax is:
Net Profit after tax = Net Profit before tax × (1 - Tax rate)
Substituting the values:
50,000 = Net Profit before tax × (1 - 0.20)
50,000 = Net Profit before tax × 0.80
Net Profit before tax = 50,000 ÷ 0.80
Net Profit before tax = Rs. 62,500
The long-term debt information provided is not required for this calculation. Net Profit before tax is calculated directly from Net Profit after tax by reversing the tax effect. Since tax is deducted from Net Profit before tax to arrive at Net Profit after tax, we simply divide the after-tax profit by (1−Tax rate) to get the before-tax profit.