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A company’s operating income is $150,000 and its interest expenses are $30,000.

Practice Questions

Q1
A company’s operating income is $150,000 and its interest expenses are $30,000. What is its earnings before tax?
  1. $120,000
  2. $150,000
  3. $180,000
  4. $200,000

Questions & Step-by-Step Solutions

A company’s operating income is $150,000 and its interest expenses are $30,000. What is its earnings before tax?
  • Step 1: Identify the operating income, which is given as $150,000.
  • Step 2: Identify the interest expenses, which are given as $30,000.
  • Step 3: To find earnings before tax, subtract the interest expenses from the operating income.
  • Step 4: Perform the calculation: $150,000 (operating income) - $30,000 (interest expenses) = $120,000.
  • Step 5: The result, $120,000, is the earnings before tax.
  • Earnings Before Tax Calculation – Earnings before tax (EBT) is calculated by subtracting interest expenses from operating income.
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