# EBIT Margin

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 %