Question

Describe how you can impact the EBIT of your company ?thank you

Answer 1

1. Cost of goods sold

For a manufacturing concern, the cost of goods sold (COGS) account tracks the direct labor, direct materials and overhead production expenses. COGS is also used by retail businesses to tracks their costs of purchasing inventory for resale. These costs reduce your company’s profit. If all other income statement items remain the same, reducing your COGS will increase your EBIT. You can lower your COGS costs by reducing one or more of its components such as taking discounts for buying inventory in bulk or placing orders large enough to qualify for shipping discounts.

2. Operating expenses

Cutting operating expenses such as your monthly rent or mortgage payment, insurance costs, payroll, postage, property taxes, supplies and utilities, will increase your EBIT. Reducing your operating expenses helps eliminate waste and unnecessary expenditures while increasing your EBIT.

3. Depreciation

The depreciation method you select directly affects your EBIT. If you want to increase your EBIT, you can do so if you can decrease your annual depreciation expense. Using straight-line depreciation instead of accelerated depreciation reduces your depreciation expense and increases your EBIT.