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Earnings Before Interest After Taxes - EBIAT Example

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carole jones
Student (University), United States

Earnings Before Interest After Taxes - EBIAT Example

🔥 I have a question: as I am drowning in a course on financial management.
A companys projected sales for 1/2010: $400,000; 2/2010 $540000; 3/2010: $350000, 4/2010: $450000, 5/2010 $480000; 6/2010 $520000;
30% of sales is collected in cash at the time of sale; 60% in the month following the sale, 10% in the 2nd month after the sale.
Cost of Goods Sold 70% of sales.
Expenses $50,000 monthly.
Company must have $20,000 cash monthly.
What is the earnings before interest and taxes for April 2010?
1. $85,000, 2. $159,000 3. $138,000 4. $135,000.
Please explain steps to arrive at outcome. Thank you.
 
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josh wolf
Analyst, United States
 

EBIAT Calculation

April revenue = $450,000
COGS = 70% of revenue = $315,000
Expenses = $50,000
Earnings Before Interest After Taxes (EBIAT) = 450,000 - 315,000 - 50,000 = $85,000.

 

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More on EBIAT:
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