# The Bubba Corp. had earnings before taxes of $202,000 and sales of$2,020,000. If it is in the...

## Question:

The Bubba Corp. had earnings before taxes of $202,000 and sales of$2,020,000.

If it is in the 51% tax bracket, its after-tax profit margin is:

a. 6.90%

b. 7.40%

c. 7.90%

d. 4.90%

## Profit Margin:

Profit margin is the profit earned from any business expressed in the form of a percentage. It is calculated by dividing the before-tax profit by Net sales of a firm. However, the after-tax margin is the main indicator of the profitability of any enterprise.

After-tax profit = $202,000 x (1 - 0.51) =$98,980

After-tax profit margin = $98,980 /$2,020,000 = 0.049 or 4.9%

Option d is correct.