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Question
From the following information regarding Aditya Ltd. which is in the business of manufacturing green tea, calculate the Return on Investment and Interest Coverage Ratio of the company: (Show working)
| Earning before interest and tax | ₹ 15,00,000 |
| 10% debentures | ₹ 12,00,000 |
| Equity Share Capital (₹10 each) | ₹ 18,00,000 |
| Tax Rate | 40% |
Numerical
Solution
Calculation of Return on Investment (ROI)
`ROI = "Earnings before interest and tax"/"Total investment" xx 100`
`ROI = 1500000/3000000 xx 100`
= 50%
Calculation of Interest Coverage Ratio (ICR)
`"Interest coverage ratio" = "Earnings before interest and tax"/"Interest"`
`ICR = 1500000/120000`
= 12.5 times
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2024-2025 (March) Board Sample Paper
