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Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent?-2.43 percent1.56 percent3.33 percent-5.29 percent-6.11 percent

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  1. Today, 20:08
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    Option (B) is correct.

    Explanation:

    EBIT = 5.8 percent of sales

    = 0.058 * $137,000

    = $7,946

    Earning before tax (EBT) = EBIT - Interest

    = $7,946 - $4,700

    = $3,246

    Earning after tax or net income = Earning before tax - Tax @34%

    = $3,246 - $1,103.64

    = $2,142.36

    Profit margin ratio = Net income : Net sales

    = $2,142.36 : $137,000

    = 0.0156 or 1.56%
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Home » Business » Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent?-2.43 percent1.56 percent3.
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