A company is doing EBIT-EPS analysis as it is planning to use debt in its capital structure.
Arrange the following items in correct sequence for calculation of EPS
(A) Earnings Before Tax
(B) Earnings Before Interest and Taxes
(C) Earnings After Taxes
(D) Interest on Debt
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (D), (A), (C)
(B) Earnings Before Interest and Taxes — first. EBIT is the operating profit of the business. It is the starting point, because it does not depend on how the business is financed.
(D) Interest on Debt — second. Interest is deducted from EBIT. This is the point at which debt in the capital structure starts to affect EPS.
(A) Earnings Before Tax — third. EBIT minus interest gives EBT, the profit on which tax is charged.
(C) Earnings After Taxes — fourth. Tax is deducted from EBT to give EAT. EAT divided by the number of equity shares gives the earnings per share (EPS).
NCERT (2026-27 Edition):
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