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Use one matching set of fictional figures
EBIT is 360, EBT 270, average assets 2,100 and average equity 700. Net income is 189 and revenue 3,000 for the same period and scope.
Calculate the factor chain
| Factor | Calculation | Value |
|---|---|---|
| Tax factor | 189/270 | 0.7 |
| Interest factor | 270/360 | 0.75 |
| EBIT margin | 360/3,000 | 12% |
| Asset turnover | 3,000/2,100 | 1.428571…× |
| Equity multiplier | 2,100/700 | 3.0× |
Check the intermediate margin
The first three factors multiply to 0.7×0.75×0.12 = 0.063, or 6.3%. That equals 189/3,000. It is not 9%; 9% is EBT divided by revenue on these figures.
Complete the reconciliation
Multiplying by the remaining turnover and equity factors gives 27%, equal to 189/700. Intermediate rounded display values should not replace the full-precision ratios in this check.