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.

Answer and Explanation:


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.


Learn more about this topic:

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How to Calculate Sales Revenue: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 27
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