Question

a firm reports a net profit margin of 10% on sales of $3 million when ignoring the effects of financing. if taces are $20000 how much is EBIT

Answer 1

$320,000

Step-by-step explanation:

EBIT is earnings before interest and tax.

This case in point ignores the financing impact of interest expense, EBIT is the same as the net income plus taxes

net profit margin=net income/sales

net profit margin=10%

net income is unknown

sales=$3,000,000

10%=net income/$3,000,000

net income=10%*$3,000,000=$300,000

taxes=$20,000

EBIT=$300,000+$20,000=$320,000