Question

Under the statement of profit or loss, can EBIT be calculated by "profit before tax+finance costs"?...

Under the statement of profit or loss, can EBIT be calculated by "profit before tax+finance costs"? If it can't, how should we calculate EBIT in the statement of profit or loss when interest expense isn't stated.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Financing cost is also known as the cost of finances (COF). It refers to the cost, interest, and other charges involved in the borrowing of money to build or purchase assets.

Yes, EBIT can be calculated by adding Finance cost in Profit before tax (EBIT= Profit before tax + Finance Cost).

Proof-

We know that, EBIT - Finance Cost = Profit before Tax

Thus, taking Finance cost on Right hand side, we have,

EBIT = Profit before tax + Finance cost

PART B-

EBIT (Earning before Interest and taxes) do not consider Interest expense in it. If Interest expense is not stated, then we can simply deduct various cash and non cash expenses (other than interest) from the revenue to obtain Earnings before interest and taxes.

Incase of any doubt, please comment below. I would be happy to help.

Please upvote the answer if it was of help to you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Net loss before taxation is ($10,500). A number of items in the profit and loss account...
Net loss before taxation is ($10,500). A number of items in the profit and loss account have to be treated differently for tax purposes. Accounting Records Taxation Records Interest income earned but not yet received 9,000 Nil Impairment of goodwill 15,000 Nil Transfer to long service leave provision 8,000 Nil Depreciation of machinery 20,000 15,000 Transfer to allowance for doubtful debts 4,500 Nil An extract from the balance sheet at balance day reveals: Assets Carrying Amount Tax Base Plant and...
Net loss before taxation is ($10,500). A number of items in the profit and loss account...
Net loss before taxation is ($10,500). A number of items in the profit and loss account have to be treated differently for tax purposes. Accounting Records Taxation Records Interest income earned but not yet received 9,000 Nil Impairment of goodwill 15,000 Nil Transfer to long service leave provision 8,000 Nil Depreciation of machinery 20,000 15,000 Transfer to allowance for doubtful debts 4,500 Nil An extract from the balance sheet at balance day reveals: Assets Carrying Amount Tax Base Plant and...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
The financial statements for Wiley Ltd are presented below Statement of profit or loss and other...
The financial statements for Wiley Ltd are presented below Statement of profit or loss and other comprehensive income for Wiley Ltd for the year ending 30 June 2019 $ $ Sales (credit) 250 000 Cost of sales – Inventory—01 July 2018 (25 000) – Purchases (152 500) – Inventory—30 June 2019     27 500 (150 000) Gross profit 100 000 Selling and administrative expenses (20 000) Depreciation (40 000) Profit before tax 40 000 Income tax expense (20 per cent)...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of...
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were incurred, not necessarily...
3. Income statement The income statement, also known as the profit and loss (P&L) statement, provides...
3. Income statement The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm’s gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm’s revenues and expenses to the period in which they were...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT