Question

A company reported net profit before tax of Rs.36,100. It has raised debt capital of Rs.250,000 through 13% debentures. What is the interest coverage ratio of the company?

A 6.92 Correct Answer Incorrect Answer
B 2.11 Correct Answer Incorrect Answer
C 1.11 Correct Answer Incorrect Answer
D 4.32 Correct Answer Incorrect Answer
E 3.12 Correct Answer Incorrect Answer

Solution

Interest coverage Ratio = EBIT / Interest Interest = 13% of 250000 = 32500 EBIT = profit before tax + interest = 36100 +32500 = 68,600   Therefore, Interest coverage ratio = 68600/32500 = 2.11 times

Practice Next
×
×