Goggle Limited has the following figures in its statement of profit or loss for the year ended 31 October 2021
$$\begin{array}{l}
\begin{array} {lll }
&£\
\text {Grass profit}&84,000\
\text {Administration expenses}&24,000\
\text {Bank overdraft interest}&600\
\text {bank laan interest}&2,400\
\text {Selling and distribution casts}&21,000\
\text {Prafit before taxatian}&36,000\
\text {Taxation}&9,000\
\end{array}
\end{array}$$ Based on the above figures, what is Goggle Limited's interest cover ratio for the year ended 31 October 2021?

Question

Goggle Limited has the following figures in its statement of profit or loss for the year ended 31 October 2021
$$\begin{array}{l}
\begin{array} {lll } 
&£\
\text {Grass profit}&84,000\
\text {Administration expenses}&24,000\
\text {Bank overdraft interest}&600\
\text {bank laan interest}&2,400\
\text {Selling and distribution casts}&21,000\
\text {Prafit before taxatian}&36,000\
\text {Taxation}&9,000\
\end{array}
\end{array}$$ Based on the above figures, what is Goggle Limited's interest cover ratio for the year ended 31 October 2021?

Quizplus · Accepted Answer

The interest cover ratio is calculated as Profit before Interest and Tax (PBIT) / Interest Expense. Here, PBIT is the Profit before taxation plus interest expenses, which is £36,000 + £600 (Bank overdraft interest) + £2,400 (Bank loan interest) = £39,000. The total interest expense is £600 + £2,400 = £3,000. Therefore, the interest cover ratio is £39,000 / £3,000 = 13 times.

Goggle Limited Has the Following Figures in Its Statement of Profit