Based on following information of a company as at 31 March, 2017. Answer question.
|
Items |
Rs. |
|
Inventory |
1,00,000 |
|
Total Current Assets |
1,60,000 |
|
Shareholders Fund |
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
Net Profit before Interest = Net Profit before Tax + Interest on Long & Tax term Debts
= 3,51,000 + (13% of 3,00,000)
= 3,51,000 + 39,000
= 3,90,000
Interest Coverage Ratio = Net Profit before Interest & Tax / Interest on Long Term Debts
= 3,90,000 / 39,000
= 10 times