Goggle Limited has the following figures in its statement of profit or loss for the year ended 31 October 2019:
$\begin{array}{ll}
& £ \
\text { Gross profit } &84,000 \
\text { Administration expenses } &24,000 \
\text {Bank overdraft interest } &600 \
\text { Bank loan interest } &2,400 \
\text { Selling and distribution costs } &21,000 \
\text { Profit before taxation } &36,000 \
\text { Taxation } &9,000
\end{array}$

Question

Goggle Limited has the following figures in its statement of profit or loss for the year ended 31 October 2019:
$\begin{array}{ll}
& £  \
\text { Gross profit } &84,000 \
\text { Administration expenses } &24,000 \
\text {Bank overdraft interest  } &600 \
\text {  Bank loan interest } &2,400 \
\text { Selling and distribution costs } &21,000 \
\text { Profit before taxation } &36,000 \
\text { Taxation } &9,000
\end{array}$

Quizplus · Accepted Answer

The interest cover ratio is calculated as (Profit before taxation + Bank overdraft interest + Bank loan interest) / (Bank overdraft interest + Bank loan interest). Here, it is (36,000 + 600 + 2,400) / (600 + 2,400) = 39,000 / 3,000 = 13 times.

Goggle Limited Has the Following Figures in Its Statement of Profit