Question

The earning after tax are rs 1230000 income tax rate is 38.5% and interest is rs 4000 find EBIT

Answer 1

2004000

Explanation:

if profit after tax is 61.5 so profit before tax is 100

if profit after tax is 1230000 so profit before tax is 1230000×100/61.5=2000000+ interest 4000=2004000

Answer 2

EBIT = Rs. 20,04,000

Explanation:

Earnings Before Interest and Taxes is the income statement of the business. It  is also known as Operating Income. It is the profitability ratio which helps in determining the last subtotals in the income statement before net income. EBIT is the amount of money a company makes without taking into account interest or taxes and is commonly used to this measure operating profits or operating earnings. Earnings before interest and tax is a measure of how profitable a company is.

There are 2 formulas for calculating EBIT:

• EBIT=Total Revenue − Cost of Goods Sold − Operating Expenses
• EBIT=Net Income + Interest + Taxes

According to the question,

Let, Profit before tax be 100.

So, Profit after tax is 61.5% (100 - 38.5)

Also, it is given that profit after tax is Rs. 12,30,000

So, profit before tax = 12,30,000 × $\frac{100}{61.5}$ = Rs. 20,00,000

∴ EBIT = Profit before tax + Interest

           = 20,00,000 + 4000

           = Rs. 20,04,000