#### Definition:

In accounting, EBIT margin is a measure of an organization's profit which is found as earnings before interest and tax(EBIT) divided by net revenue. It helps to identify the organization yearly growth.

#### Formula:

EBIT = R - E
EBIT Margin = EBIT / R
Taxable Income = EBIT - I
Tax Amount = Taxable Income x T
Net Income = Taxable Income - Tax Amount
Profit Margin = Net Income / R
###### Where,

R = Sales Revenue
E = Operating Expenses
I = Interest Paid
T = Tax Rate
#### Example :

A company has sales of $500000 with operating costs of $450000, interest paid of $6000 and a tax rate of 30%. Calculate the EBIT, Net Income, and Profit Margin.

##### Given :

Sales Revenue (R) = $500000
Operating Expenses (E) = $450000
Interest Paid (I) = $6000
Tax Rate (T) = 30% = 0.3

##### To Find :

Earnings Before Interest and Taxes, Net Income and Profit Margin

##### Solution :

EBIT = R - E
= $500000 - $450000)
= $50000
EBIT Margin = EBIT / R
= ($50000 / $500000) x 100
= 10 %
Taxable Income = EBIT - I
= $50000 - $6000
= $44000
Tax Amount = Taxable Income x T
= $44000 x 0.3
= $13200
Net Income = Taxable Income - Tax Amount
= $44000 - $13200
= $30800
Profit Margin = Net Income / R
= ($30800 / $500000) x 100
= 6.16 %