Question

A firm has Gross Profit of $3.1 million, cost of sales of $1.6 million, operating expenses of $0.6 million, and "other" income of $1.5 million. What is its EBIT? A) $2 million B) $0.3 million C) $4 million D) $0.6 million

Answer 1

Answer:

C. $4 million

Explanation:

With regards to the above we need to compute first the net profit, before the EBIT.

Gross profit

$3.1 million

Less : operating expenses

($0.6 million)

Net profit

$2.5 million

Therefore, the EBIT is computed as;

EBIT = Net profit + other income

EBIT = $2.5 million + $1.5 million

EBIT = $4.0 million.

The value of EBIT is $4 million.

Answer 2

The EBIT is $4 million.

Calculation of EBIT:

Since Gross Profit of $3.1 million, cost of sales of $1.6 million, operating expenses of $0.6 million, and "other" income of $1.5 million.

So, here the EBIT should be

=  gross profit - operating expenses + other income

= 3.1 -0.6 + 1.5

= $4 million

hence, the correct option is c.

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