# 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

#### 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 %