Answer the questions from the passage-
Following information is provided about a Company:
Share Capital:
Equity (Rs.10) Rs. 4,00,000
12% Preference Rs. 1,00,000
General Reserve Rs. 1,84,000
10% Debentures Rs. 4,00,000
Current Liabilities Rs. 1,00,000
Fixed Assets Rs. 9,50,000
Current Assets Rs. 2,34,000
The market price of the share is Rs. 34 and the net profit after tax was Rs. 1,50,000, and the tax had amounted to Rs. 50,000.
Profit before interest and tax-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 2,40,000
Profit before interest and tax is rebuilt from the net profit after tax by adding back the tax and the interest that were deducted to arrive at it.
Net profit after tax = Rs 1,50,000
Add: Tax = Rs 50,000
Add: Interest on 10% debentures = 10% of Rs 4,00,000 = Rs 40,000
Profit before interest and tax = Rs 2,40,000
Adding back only the tax gives Rs 2,00,000, which is profit before tax but still after debenture interest.
NCERT (2026-27 edition):
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