CFAI says an interest burden factor ( EBT/EBIT) greater than 100 percent means that nonoperating income exceeded interest expense. Could somebody explain this, please? Thank you!
think about how these measures are calculated… how do you get from EBT to EBIT? and, having an interest burden factor >100% implies that: EBT>EBIT So, what does this tell you about Interest expense?
EBIT= EBT+Interest So, EBT/EBIT= 1-Int/EBIT Where does nonoperating income come into play? I do not know its aritmetic relationship with EBIT …
Operating income + non-operating income = EBIT im not sure if that helps at all… sorry, i had too many beers at lunch
I do not think it helps…
If EBT > EBIT (because the Interest Burden Factor > 1) and because EBIT = EBT - Interest expense what this means is that instead of having an Interest Expense - you have instead an Interest Income. And Interest Income is non-operational. I think this is what they are trying to say, but I COULD BE TERRIFICALLY OFF!!!.. CP
EBT=Operating Income+Non Operating Income - Income Tax Not too sure.
EBT=Operating Income+Non Operating Income - Interest Expense Sorry about the mistake
Hopeful231 I love the Dune quote!
Ayo, Thanks alot. Didnt think anybody would notice. Was my equation correct.