Answer:
EBT 3,400
Explanation:
Earnings before Taxes (EBT)
sales revenue 12,500
operating cost (7,250)
EBDIT 5,250
(earnings before depreciation, interest and taxes)
Depreciation (1,250)
Interest
debt x cost of debt
8,000 x 7.5% = (600)
EBT 3,400
This will be the taxable income from which the income tax will be calculated.
Answer:
EBT = $3400
Explanation:
Income Statement
$
Sales Revenue 12,500
Operating costs ( 7,250 )
Operating profit (EBDIT) * 5,250
Depreciation Expense (1,250)
EBIT** 4,000
Finance cost (7.5%) (600)
EBT 3,400
*EBDIT-Earnings Before Depreciation,Interest and Tax
**EBIT-Earnings Before Interest and Tax
EBT represents earnings available from which distribution to tax authority can be made and dividends can also be paid-out to shareholders and the balance can then be retained for future business investment and expansion.
As a financial measure, it can be used to set target and measure performance of different divisional managers. This is possible because they have control over theit performance unlike when tax has been adjusted for which is not within their control. However, each divisional manager must be responsible for its financing decision before they can be held responsible for their performane on basis of EBT
