A firm's operating profit margin is 20% with an EBIT of $1.5 million and sales of $5 million.If it has no debt,how much did the firm pay in taxes?
A) $50,000
B) $300,000
C) $350,000
D) $500,000

Question

Quizplus · Accepted Answer

Without any interest expense, the operating profit margin can be computed as:Operating profit margin = (EBIT − taxes) / sales0.20 = ($1,500,000 − taxes) / $5,000,000Taxes = $500,000

A Firm's Operating Profit Margin Is 20% with an EBIT