In accounting, EBIT margin is a measure of an organization’s profit which is found as earnings before interest and tax(EBIT) divided by net revenue. It helps to identify the organization yearly growth.

Calculate Earnings Before Interest and Taxes Margin

Sales Revenue (R) =
Operating Expenses (E) =
Interest Paid (I) =
Tax Rate (T) = %
 
 
EBIT =
EBIT Margin = %
Taxable Income =
Tax Amount =
Net Income =
Profit Margin = %

Formula Earnings Before Interest and Taxes Margin

EBIT = R – E

EBIT Margin = EBIT / R

Taxable Income = EBIT – I

Tax Amount = Taxable Income x T

Net Income = Taxable Income – Tax Amount

Profit Margin = Net Income / R

Where,

  • R = Sales Revenue
  • E = Operating Expenses
  • I = Interest Paid
  • T = Tax Rate

Example Earnings Before Interest and Taxes Margin

A company has sales of $500000 with operating costs of $450000, interest paid of $6000 and a tax rate of 30%. Calculate the EBIT, Net Income, and Profit Margin.

Given

Sales Revenue (R) = $500000 Operating Expenses (E) = $450000 Interest Paid (I) = $6000 Tax Rate (T) = 30% = 0.3

To Find

Earnings Before Interest and Taxes, Net Income and Profit Margin

Solution

EBIT = R – E
= $500000 – $450000
= $50000

EBIT Margin = EBIT / R
= ($50000 / $500000) x 100
= 10 %

Taxable Income = EBIT – I
= $50000 – $6000
= $44000

Tax Amount = Taxable Income x T
= $44000 x 0.3
= $13200

Net Income = Taxable Income – Tax Amount
= $44000 – $13200
= $30800

Profit Margin = Net Income / R
= ($30800 / $500000) x 100
= 6.16 %

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