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12th Class Accountancy Accounting Ratios Question Bank MCQs - Accounting Ratios

  • question_answer
    Calculate interest coverage ratio. If profit after interest and tax Rs. 2,10,000, Rate of tax 40%, 15% debenture Rs. 3,00,000.

    A) 6 times 

    B) 8.8 times

    C) 11 times            

    D) 4 times

    Correct Answer: B

    Solution :

    [b] Hint: Profit before interest and tax =  \[\frac{2,10,000\times 100}{~~ 60}\] =Rs. 3,50,000
    15% debenture interest = Rs. 45,000
    Profit before interest and tax
    =3,50,000 + 45,000 =  Rs. 3,95,000
     Interest Coverage Ratio = \[\frac{Profit before Interest and Tax}{~~ Fixed Interest Charge}\]
    = \[\frac{3,95,000}{~~ 45,000}\]=8.8 times


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