| Particulars | Amount ( Rs.) |
| 10,000 Equity Shares of Rs. 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 |
SOLUTION
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
= 75,000 + 9,000 + 5,000 + 5,000
= 94,000
Total Interest Amount = Interest on Debentures + Interest on Long-term loans from Bank
= 5,000 + 5,000 = 10,000
Interest Coverage Ratio = Net Profit before Interest and Tax / Interest
= 94,000 / 10,000
= 9.4 times