Question

Kwok Enterprises has the following income statement. How much after-tax operating income does the firm have? Sales $2,050 Costs 1,400 Depreciation 250 EBIT $400 Interest expense 70 EBT $330 Taxes (25%) 82.50 Net income $247.50

Answer 1

Answer:

Sales                                  2,050

Costs                                  (1,400)

Depreciation                      (250)

EBIT                                     400

Interest expense                 (70)

Earnings before tax             330

Tax @ 25%                           (82.50)

After-tax operating income 247.50

Explanation:

The after-tax operating income equals sales minus costs minus depreciation minus interest expense minus tax.

Answer 2

The after-tax operating income of the firm is 247.50

How would you justify your statement?

• Sales                                  2,050
• Costs                                  (1,400)
• Depreciation                      (250)
• EBIT                                     400
• Interest expense                 (70)
• Earnings before tax             330
• Tax at 25%                           (82.50)
• After-tax operating income 247.50

What is after-tax operating income?

• The operating income of a company is a measure of how much of its revenue will eventually become profitable.
• After-tax operating income (ATOI) assesses a company's ability to generate revenue from its operations over a given period.
• It is simply the operating income (or loss) generated by a company after taxes are deducted. In essence, it is earnings before interest and taxes (EBIT with fewer taxes).

How to calculate after-tax operating income?

ATOI = (Gross Revenue - Operating expenses - Depreciation) - Tax

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