Question

The Bubba Corp. had earnings before taxes of $200,000. and sales of $2,000,000. If it is in the 50% TAX BRACKET ITS AFTER-TAX PROFIT MARGIN IS?

Answer 1

The after-tax profit margin is 25%. ($200,000 / $2,000,000 = 0.10 x 100 = 10% profit margin. 10% x 50% tax rate = 5%. 10% - 5% = 5% after-tax profit margin).