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Answer: EBIT margin
## Detailed Explanation Let's calculate each metric for Year 1 and Year 2: ### 1. Basic EPS **Year 1:** - Net income = €58,000 - Weighted average shares = 635,000 - Basic EPS = €58,000 / 635,000 = €0.0913 **Year 2:** - Net income = €57,500 - Weighted average shares = 650,000 - Basic EPS = €57,500 / 650,000 = €0.0885 **Result:** Basic EPS decreased from €0.0913 to €0.0885 ### 2. EBIT Margin **Year 1:** - EBIT = €91,500 - Revenue = €720,000 - EBIT margin = €91,500 / €720,000 = 12.71% **Year 2:** - EBIT = €93,500 - Revenue = €725,000 - EBIT margin = €93,500 / €725,000 = 12.90% **Result:** EBIT margin increased from 12.71% to 12.90% ### 3. Net Profit Margin **Year 1:** - Net income = €58,000 - Revenue = €720,000 - Net profit margin = €58,000 / €720,000 = 8.06% **Year 2:** - Net income = €57,500 - Revenue = €725,000 - Net profit margin = €57,500 / €725,000 = 7.93% **Result:** Net profit margin decreased from 8.06% to 7.93% ### Conclusion Only EBIT margin increased from Year 1 to Year 2. **Correct Answer: B**
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An analyst gathers the following information about a company:
| Year 2 | Year 1 | |
|---|---|---|
| Revenue | €725,000 | €720,000 |
| EBIT | €93,500 | €91,500 |
| Net income | €57,500 | €58,000 |
| Weighted average common shares outstanding during the year | 650,000 | 635,000 |
Which of the following increased from Year 1 to Year 2?
A
Basic EPS
B
EBIT margin
C
Net profit margin
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