Question

X-1 Corp's total assets at the end of last year were $490,000 and its EBIT was 52,500. What was its basic earning power (BEP) ratio? a. 13.07% b. 11.57% c. 10.71% d. 10.29% e. 12.86%

Answer 1

10.71%

Explanation:

Calculation for basic earning power (BEP) ratio

Using this formula

Basic earning power (BEP) =EBIT/Total assets

Let plug in the formula

Basic earning power (BEP)=$52,500/$490,000

Basic earning power (BEP)=0.1071*100

Basic earning power (BEP)=10.71%

Therefore the basic earning power (BEP) ratio will be 10.71%