Companies generate income from their "regular" operations and from other sources like interest earned on the securities they hold,which is called non-operating income.Lindley Textiles recently reported $12,500 of sales,$7,250 of operating costs other than depreciation,and $1,000 of depreciation.The company had no amortization charges and no non-operating income.It had $8,000 of bonds outstanding that carry a 7.5% interest rate,and its federal-plus-state income tax rate was 40%.How much was Lindley's operating income,or EBIT?
A) $3,462
B) $3,644
C) $3,836
D) $4,038
E) $4,250

Question

Quizplus · Accepted Answer

Operating income, or EBIT, is calculated as Sales minus Operating Costs and Depreciation. Thus, EBIT = $12,500 - $7,250 - $1,000 = $4,250.

Companies Generate Income from Their "Regular" Operations and from Other