Calculate the EBIT (Earnings Before Interest and Taxes) for a Firm

question 16

Multiple Choice

Calculate the EBIT (Earnings Before Interest and Taxes) for a firm with $4 million total revenues, $3.5 million cost of goods sold, $500,000 depreciation expense, and $120,000 interest expense.

• A)$500,000
• B)$380,000
• C)$0
• D)$120,000

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Definitions:

Forward Contract

A tailored agreement between two entities to purchase or sell a specific asset at a predetermined price on a future date.

Cash Flow Hedge

A financial strategy used to reduce the risk associated with fluctuations in cash flow due to changes in exchange rates, interest rates, or commodity prices.

Japanese Yen

The official currency of Japan, symbolized as ¥ and known for being one of the most traded currencies in the global foreign exchange market.

Forward Contract

A financial derivative that represents a customized contract between two parties to buy or sell an asset at a specified price on a future date, which is not traded on an exchange.