Question

A firm has taxes of $2,000, interest expense of $1,000, EBIT of $7,500, common stock dividends of $1,500, and preferred dividends of $1,200. What is the profit margin if sales are $22,000

Answer 1

the profit margin is 15%

Step-by-step explanation:

The computation of the profit margin is shown below:

= (EBIT - interest - taxes - preferred dividend) ÷ Sales

= ($7,500 - $1,000 - $2,000 - $1,200) ÷ $22,000

= $3,300 ÷ $22,000

= 15%

Hence, the profit margin is 15%

Basically the above formula should be applied for the same