X-1 Corp's total assets at the end of last year were $405,000 and its EBIT was...

X-1 Corp's total assets at the end of last year were $405,000 and its EBIT was 52,500. What was its basic earning power (BEP) ratio? a. 12.96% b. 14.29% c. 11.70% d. 12.31% e. 13.61%

Expert Solution

This ratio indicates the ability of the firm's assets to generate operating income. Basic earning power (BEP) ratio is a measure that calculates the earning power of a business before the effect of the business' income taxes and its financial leverage.

It is calculated by dividing earnings before interest and tax (EBIT) by total assets.

Basic Earning Power = EBIT/Total Assets

= 52500/405000

= 0.12963

It means 12.96%

Answer is a. 12.96%

jeff jeffy answered 2 years ago

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X-1 Corp's total assets at the end of last year were $405,000 and its EBIT was...

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