Given the same data as above (revenue $10B, gross margin 65%, SG&A $2B), what is EBIT?

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Multiple Choice

Given the same data as above (revenue $10B, gross margin 65%, SG&A $2B), what is EBIT?

Explanation:
EBIT is earnings before interest and taxes, i.e., operating profit after deducting cost of goods sold and operating expenses. With revenue of $10B and a gross margin of 65%, gross profit is 0.65 × 10B = $6.5B. Subtracting SG&A of $2B gives EBIT of $6.5B − $2B = $4.5B. So the value is $4.5B. This is the correct result because EBIT reflects profitability from core operations before borrowing costs and taxes. The other numbers would come from misapplying the margins or omitting the operating expenses entirely (for example, taking SG&A alone or misinterpreting the margin).

EBIT is earnings before interest and taxes, i.e., operating profit after deducting cost of goods sold and operating expenses. With revenue of $10B and a gross margin of 65%, gross profit is 0.65 × 10B = $6.5B. Subtracting SG&A of $2B gives EBIT of $6.5B − $2B = $4.5B. So the value is $4.5B.

This is the correct result because EBIT reflects profitability from core operations before borrowing costs and taxes. The other numbers would come from misapplying the margins or omitting the operating expenses entirely (for example, taking SG&A alone or misinterpreting the margin).

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