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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated September 30, 2020

What is Profit Before Tax?

Profit before tax measures a company's operating and non-operating profits before taxes are considered. It is the same as earnings before taxes.

Profit Before Tax Example

Simplifying things a bit, revenue minus expenses equals earnings. The resulting figure is usually listed on a company's income statement right before taxes are listed. For example, take a look at the income statement for Company XYZ:

In this example, profit before tax is $150,000 while net income is $100,000.

Why Profit Before Tax Matters

Profit before tax provides investment analysts with useful information for evaluating a company's operating performance without regard to tax implications. By removing the tax factor, profit before tax helps to minimize a variable that may be unique from company to company, in order to focus the analysis on operating profitability as a singular measure of performance. Such analysis is particularly important when comparing similar companies across a single industry.

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