Based on the following information of a company as at 31 March, 2017, answer the question.
|
Items |
Rs. |
|
Inventory |
1,00,000 |
|
Total Current Assets |
1,60,000 |
|
Shareholders’ Funds |
4,00,000 |
|
13% Debentures |
3,00,000 |
|
Current liabilities |
1,00,000 |
|
Net Profit before Tax |
3,51,000 |
|
Cost of Revenue from operations |
5,00,000 |
The Interest Coverage Ratio of the company will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 10 times
Interest Coverage Ratio = Net Profit before Interest and Tax ÷ Interest on Long-term Debts
Interest on 13% Debentures = 13% of ₹3,00,000 = ₹39,000
Net Profit before Interest and Tax = ₹3,51,000 + ₹39,000 = ₹3,90,000
Interest Coverage Ratio = ₹3,90,000 ÷ ₹39,000
= 10 times
NCERT (2026-27 edition):
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