calculate interest coverage ratio and give your comments:
net profit after tax:120000
rate of income tax:40%
16% debentures Rs 100000

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Solution

Interest Coverage Ratio = Profit before Interest and Tax
Profit after Tax = Rs 1,20,000
Tax Rate = 40%
Value of 60% = Rs 1,20,000
Value of 40% = Rs 1,20,000/60%40% = Rs 80,000

Profit after Interest but before Tax = Rs 2,00,000 (Rs 1,20,000+Rs 80,000)
Interest on Loan = Rs 16,000 (Rs 1,00,00016%)
Profit before Interest and Tax = Rs 2,00,000+Rs 16,000 = Rs 2,16,000

Interest Coverage Ratio = Rs 2,16,000/16,000 = 13.5:1.

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calculate interest coverage ratio and give your comments:net profit after tax:120000rate of income tax:40%16% debentures Rs 100000

calculate interest coverage ratio and give your comments:
net profit after tax:120000
rate of income tax:40%
16% debentures Rs 100000