To calculate interest coverage ratio; steps followed will be

Net Profit after tax Rs. 60,000; 12% Long-term debt 20,00,000; and Tax rate 40%.

(A) Calculate Net Profit before tax

(B) Divide Net Profit before Interest and Tax by Interest on long-term debt

(C) Calculate Net profit before interest and tax

(D) Calculate Interest on Long-term Debt

Choose the correct answer from the options given below:

(A), (D), (C), (B)

The correct answer is option 1- (A), (D), (C), (B).

(A) Calculate Net Profit before tax- Firstly calculate the net profit before tax by using net profit after tax and tax rate.

(D) Calculate Interest on Long-term Debt- After calculating the net profit before tax, we will calculate the interest on long term debt.

(C) Calculate Net profit before interest and tax- Deduct the interest from the net profit before tax.

(B) Divide Net Profit before Interest and Tax by Interest on long-term debt- Apply the formula of interest coverage ratio i.e. Net Profit before Interest and Tax/Interest on long-term debts