Pre-tax profits

Pre-tax profits, also known as profit before tax (PBT), represent the profit earned by a business after deducting all operating expenses, depreciation, and other costs, but before accounting for income taxes. It provides a clear measure of a company’s operational profitability independent of tax obligations. Key Features of Pre-Tax Profits Calculation Pre-Tax Profit = Revenue − ( Operating Expenses + Depreciation + Other Expenses ) Pre-Tax Profit=Revenue−(Operating Expenses+Depreciation+Other Expenses) Excludes Taxes Taxes are not deducted in this calculation. Helps investors and management assess the true operating performance. Importance in Financial Analysis Comparison across companies: Tax rates vary, so pre-tax profits allow fair comparison. Investment decisions: Indicates profitability before tax planning strategies. Performance evaluation: Helps management focus on cost efficiency and revenue generation. Example A company has: Revenue = ₹50,00,000 Operating Expenses = ₹20,00,000 Depreciation = ₹5,00,000 Other Expenses = ₹3,00,000 Pre-Tax Profit = 50 , 00 , 000 − ( 20 , 00 , 000 + 5 , 00 , 000 + 3 , 00 , 000 ) = ₹ 22 , 00 , 000 Pre-Tax Profit=50,00,000−(20,00,000+5,00,000+3,00,000)=₹22,00,000