A Firm's Net Profit Margin When Ignoring the Effects of Financing

question 44

Multiple Choice

A firm's net profit margin when ignoring the effects of financing is 20% with an EBIT of $1.5 million and sales of $5 million.How much did the firm pay in taxes?

• A) $50,000
• B) $300,000
• C) $350,000
• D) $500,000

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Definitions:

Operating Assets

Assets that are used for the day-to-day operations of a business, including both current and non-current assets.

Net Operating Income

The total profit of a company after operating expenses are subtracted, but before deducting interest and taxes.

Return On Investment (ROI)

A metric for assessing how well an investment does by comparing what it returns against what it costs.

Minimum Required Rate

The lowest acceptable rate of return on an investment, as determined by management or investors.