Calculate return on investments and debt service ratio-profit after tax- 6-50-000- -8203-12-5-income tax- 50-net tangible fixed assets- 20-00-000-current assets- 15-00-000-current liabilities- 7-00-000

Earnings #160;after #160;Tax: #160;Rs #160;6,50,000Tax #160;Rate: #160;50 ...

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Standard X

Mathematics

Introduction to Banking

calculate ret...

Question

calculate return on investments and debt service ratio:
profit after tax: 6,50,000
12.5% long term borrowings: 8,00,000
income tax: 50%
net tangible fixed assets: 20,00,000
current assets: 15,00,000
current liabilities: 7,00,000

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Solution

$E a r n i n g s a f t e r T a x : R s 6, 50, 000 T a x R a t e : 50 % L e t, E a r n i n g s b e f o r e T a x b e x A c c o r d i n g l y, E a r n i n g s a f t e r t a x = E a r n i n g b e f o r e t a x - t a x 6, 50, 000 = x - . 5 x \frac{6, 50, 000}{0.5} = x E a r n i n g s b e f o r e T a x (x) = R s 13, 00, 000 A d d I n t e r e s t o n L o n g T e r m B o r r o w i n g s : 12.5 % o f R s 8, 00, 000 = R s 1, 00, 000 T h e r e f o r e, E a r n i n g s b e f o r e I n t e r e s t a n d T a x e s i s R s 14, 00, 000 R e t u r n o n I n v e s t m e n t s = \frac{E a r n i n g s b e f o r e I n t e r e s t a n d T a x e s}{C a p i t a l E m p l o y e d} \times 100 C a p i t a l E m p l o y e d = N e t F i x e d A s s e t s + C u r r e n t A s s e t s - C u r r e n t L i a b i l i t i e s = 20, 00, 000 + 15, 00, 000 - 7, 00, 000 = R s 28, 00, 000 A c c o r d i n g l y, R o I = \frac{14, 00, 000}{28, 00, 000} \times 100 = 50 % D e b t S e r v i c e C o v e r a g e R a t i o = \frac{E a r n i n g s b e f o r e I n t e r e s t a n d T a x e s}{D e b t + I n t e r e s t} = \frac{14, 00, 000}{8, 00, 000 + 1, 00, 000} = 1.55 t i m e s$

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calculate return on investments and debt service ratio: profit after tax: 6,50,000 ​12.5% long term borrowings: 8,00,000 income tax: 50% net tangible fixed assets: 20,00,000 current assets: 15,00,000 current liabilities: 7,00,000

calculate return on investments and debt service ratio:
profit after tax: 6,50,000
12.5% long term borrowings: 8,00,000
income tax: 50%
net tangible fixed assets: 20,00,000
current assets: 15,00,000
current liabilities: 7,00,000