What Are Pre-Tax Profits?

Pretax profits refer to the amount of money a company makes before taxes. Pretax profits are also known as pretax operating income.

Function

Calculate a company's pretax profits by subtracting all operating expenses, except taxes and one-time expenses, like lawsuits from the company's profits.

Significance

According to USA Today, investors like to examine pretax profits because many times a company's taxes are affected by factors that have nothing to do with how well the company performed that year, such as deferred taxes.

Time Frame

Investors compare the pretax profit of companies over several years to determine whether the company's business is improving or decreasing.

Location

Companies list pre-tax profits in their annual reports, which are usually available online at the company's website.

Effects

Eliminating non-recurring income and expenses and taxes from the expenses gives a more stable picture of a company's overall financial health.

References

• USA Today: Pretax Profit is Easy to Figure Out, or Find
• Investopedia: Pre-Tax Operating Income