A company has sales of Rs.500000 with operating costs of Rs. 450000, interest paid of Rs. 6000 and a

A company has sales of Rs.500000 with operating costs of Rs. 450000, interest paid of Rs. 6000 and a tax rate of 30%. Calculatea. the EBIT,b. Net Income, andc. Profit Margin. Given : Sales Revenue (R) = Rs. 500000 Operating Expenses (E) = Rs.450000 I nterest Paid (I) = Rs. 6000 Tax Rate (T) = 30% = 0.3 Solution : Formula: 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 EBIT = R - E = Rs. 500000 - Rs. 450000) = Rs. 50000 EBIT Margin = EBIT / R = (Rs. 50000 / Rs. 500000) x 100 = 10 % Taxable Income = EBIT - I = Rs. 50000 - Rs. 6000 = Rs. 44000 Tax Amount = Taxable Income x T = Rs. 44000 x 0.3 = Rs. 13200 Net Income = Taxable Income - Tax Amount = Rs. 44000 - Rs. 13200 = Rs. 30800 Profit Margin = Net Income / R = (Rs. 30800 / Rs. 500000) x 100 = 6.16 %