# 12th | Ts grewal 2021-2022 Question 61 to 65 | ch:4 Accounting Ratios

#### Question 61:

If Net Profit before Interest and Tax is `5,00,000 and interest on Long-term Funds is  `1,00,000, find Interest Coverage Ratio.

Net Profit before Interest and Tax = 5,00,000

Interest = 1,00,000

Interest Coverage Ratio= Net Profit before Interest and Tax/Interest

Interest Coverage Ratio =5,00,000/1,00,000

Interest Coverage Ratio = 5 times

#### Question 62:

From the following information, calculate Interest Coverage Ratio: Profit after Tax  `1,70,000; Tax  `30,000; Interest on Long-term Funds  `50,000.

Profit before Interest and Tax = Profit after Tax + Tax +Interest

Profit before Interest and Tax = 1,70,000 + 30,000 + 50,000

Profit before Interest and Tax = 2,50,000

Interest Coverage Ratio= Net Profit before Interest and Tax/Interest

Interest Coverage Ratio =2,50,000/50,000=5 times

#### Page No 4.109:

Question 63;

From the following detail, calculate Interest Coverage ratio;

 Net profit after Tax `7,00,000 6% Debentures `20,00,000 Tax Rate 30%

Interest coverage ratio= net profit before interest and tax/ interest on long term debt

Interest coverage ratio =11,20,000/1,20,000

Interest coverage ratio =9.33

Working notes;

Wn-1

Net profit after tax=7,00,000

Tax rate 30%

Net profit after tax = 70%

Net profit before tax=7,00,000 × 100/70

Net profit before tax= 10,00,000

Wn-2

Interest on loan term borrowings=20,00,000×6/100=1,20,000

Net profit before Interest and tax= 10,00,000+1,20,000=11,20,000

#### Page No 4.109:

Question 64;

From the following information, calculate Interest Coverage ratio;

Net profit after interest and  Tax `1,20,000;  Rate of Income tax;40%; 15%; Debentures `1,00,000;  12% Mortgage loan `1,00,000.

Interest coverage ratio = net profit before interest and tax / interest on long term debt

Interest coverage ratio = 2,27,000/ 27,000

Interest coverage ratio = 8.41 times

Working notes;

Wn-1

Net profit after interest and tax 1,20,000

Rate of income tax 40%

Net profit before tax= 60%

Net profit before tax=1,20,000×100/60=2,00,000

Wn-2

Interest on long term borrowings= 27,000

Interest on debenture= 1,00,000 × 15 / 100= 15,000

Interest on 12% Mortgage loan= 1,00,000 ×12 / 100= 12,000

Net profit before interest and tax= 2,00,000+ 27,000 =2,27,000

#### Question 65:

From the following information, calculate Interest Coverage Ratio:

 ` 10,000 Equity Shares of  `10 each 1,00,000 8% Preference Shares 70,000 10% Debentures 50,000 Long-term Loans from Bank 50,000 Interest on Long-term Loans from Bank 5,000 Profit after Tax 75,000 Tax 9,000

Interest on 10% debentures=50,000×10/1000=5,000

Profit before Interest and Tax = Profit after Tax + Tax + Interest on Debentures + Interest on Long-term Loans from Bank

Profit before Interest and Tax = 75,000 + 9,000 + 5,000 + 5,000

Profit before Interest and Tax = 94,000

Total Interest Amount = Interest on Debentures + Interest on Long-term loans from Bank

Total Interest Amount = 5,000 + 5,000

Total Interest Amount = 10,000

Interest Coverage Ratio = Net Profit before Interest and Tax/Interest

Interest Coverage Ratio = 94,000/10,000

Interest Coverage Ratio = 9.4 times