A firm reports a net profit margin of 10.0% on sales of $3 million when ignoring the effects of financing.If taxes are $200,000, how much is EBIT?
A)$100,000
B)$300,000
C)$500,000
D)$700,000

Question

Quizplus · Accepted Answer

EBIT (Earnings Before Interest and Taxes) is calculated by adding taxes back to the net profit. The net profit is 10% of $3 million, which is $300,000. Adding the taxes of $200,000 gives an EBIT of $500,000.

A Firm Reports a Net Profit Margin of 10