In the explanation, it says reason for the S company to have higher net profit margin than industry is due to its lower interest burden - EBT/EBIT. However in the subsequent calculations, S company’s EBT/EBIT (.79) is higher than industry’s .6389. Is there a conflict in the answer here? Or is there something so obvious that my brain simply doesn’t work at this hour? Thanks.
Whatup The company has a LOWER interest burden, EBT (after interest Paid) is higher relative to the EBIT (before interest paid) then the industry.
?? company’s INT burden EBT/EBIT = 0.79 which is higher than industry’s INT burden = 0.63. is not LOWER. unless INT burden is not like what the answer is saying = EBT/EBIT.
if you have lower intresest burden, your ebt/ebit number will be higher… ebt is ebit just without the interest. i know you know that, but sometimes i get lost in the acronyms without thinking about it… so it is tricky.
got it, thanks a lot.