CA Intermediate · Financial Management and Strategic Management · Financial Analysis and Planning - Ratio Analysis
Rohan Ltd has an interest coverage ratio of 4 times. Its EBIT is Rs 12,00,000 and the tax rate is 25%. What is its profit after tax (in Rs)?
Profit after tax is Rs 6,75,000. Interest equals EBIT of Rs 12,00,000 divided by coverage of 4, which is Rs 3,00,000. Profit before tax is Rs 9,00,000, and after deducting 25% tax of Rs 2,25,000 the profit after tax is Rs 6,75,000.
- ARs 9,00,000
- BRs 6,75,000Correct
- CRs 8,00,000
- DRs 9,75,000
Explanation
Interest = EBIT ÷ coverage = 12,00,000 ÷ 4 = 3,00,000. EBT = 12,00,000 − 3,00,000 = 9,00,000. Tax at 25% = 2,25,000, so PAT = 6,75,000. Rs 9,00,000 is EBT, ignoring tax.
Did you get it right without looking?
One question tells you little. A timed set on Financial Analysis and Planning - Ratio Analysis shows your real accuracy, how long you take and where you lose marks.
More Financial Analysis and Planning - Ratio Analysis questions
- Kaveri Traders has annual credit sales of ₹12,00,000, and opening and closing trade receivables of ₹1,80,000 and ₹2,20,000 respectively. Tak…
- A company reports sales of ₹20,00,000, a net profit margin of 6% and total assets of ₹10,00,000, financed by equity of ₹4,00,000. Using the …
- A firm has net profit margin of 5%, total asset turnover of 3 times and an equity multiplier of 2. Under the DuPont analysis, what is its re…
- Which of the following ratios is calculated as (Cost of goods sold ÷ Average inventory)?
- Aarav Ltd has current assets of Rs 6,00,000, inventory of Rs 1,80,000, prepaid expenses of Rs 20,000 and a current ratio of 2:1. What is its…
- Meera Textiles has a current ratio of 2.5:1 and a quick ratio of 1.5:1. Its current liabilities are ₹4,00,000. There are no prepaid expenses…