Question

A firm’s income statement included the following data. The firm’s average tax rate was 20%. Cost of goods sold $ 9,200 Income taxes paid $ 3,200 Administrative expenses $ 4,200 Interest expense $ 2,200 Depreciation $ 2,200

a. What was the firm’s net income?

b. What must have been the firm's revenues?

c. What was EBIT?

Answer 1

The below table depicts the current question in a tabular form :

	Particulars	Amount ($)
	Revenue	X
Less :	Cost of Goods Sold	9200
	Gross Profit	X-9200
Less :	Administrative Expenses	4200
	EBDIT	X-13400
Less :	Depreciation	2200
	EBIT	X-15600
Less :	Interest	2200
	EBT	X-17800
Less :	Income tax @ 20%	3200
	Net Income	X-21000

As given in the question the tax rate is 20%, therefore the given income tax of rs 3200 in the question is equivalent to 20% of EBT i.e.,

20%(X-17800) = 3200

so the revenue (X) comes to $ 33800

Accordingly, Net Income would be $ 12800 i.e., (33800-21000)

Accordingly EBIT would be $ 18200 i.e., (33800-15600)

Summary :

1. Net Income = $12800

2. Revenue = $33800

3. EBIT = $18200