Pre-Tax Operating Income
What is Pre-Tax Operating Income?
How Does Pre-Tax Operating Income Work?
Let's assume Company XYZ reported the following information for the fiscal year:
Using the formula and the information above, we can calculate that Company XYZ's pre-tax operating income was:
$1,000,000 - $500,000 - $300,000 - $100,000 = $100,000
Why Does Pre-Tax Operating Income Matter?
Pre-tax operating income is a measure of a company's operating efficiency because it only takes into account expenses that are directly related to ongoing business operations. capital structure (even if those companies have the same revenues).
Pre-tax operating income is a non-GAAP measure, meaning that what is included and excluded differs by company and industry. Thus, the definition of a "high" or "low" pre-tax operating income should be made within this context.