After-Tax Profit Margin

AAA

DEFINITION of 'After-Tax Profit Margin'

A financial performance ratio, calculated by dividing net income after taxes by net sales. A company's after-tax profit margin is important because it tells investors the percentage of money a company actually earns per dollar of sales. This ratio is interpreted in the same way as profit margin - the after-tax profit margin is simply more stringent because it takes taxes into account.

After-Tax Profit Margin

INVESTOPEDIA EXPLAINS 'After-Tax Profit Margin'

Often, a company's earnings don't tell the entire story. The amount of profit can increase, but that doesn't mean the company's profit margin is improving. For example, a company's sales could increase, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to better control its costs.

VIDEO

Loading the player...
RELATED TERMS
  1. Pretax Profit Margin

    A company's earnings before tax as a percentage of total sales ...
  2. Net Income After Taxes - NIAT

    An accounting term, most often found in a company's annual report, ...
  3. Net Sales

    The amount of sales generated by a company after the deduction ...
  4. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  5. Profit Margin

    A ratio of profitability calculated as net income divided by ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
RELATED FAQS
  1. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  2. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  3. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  4. How does the effective interest method treat the interest on a bond?

    The effective interest method is used when evaluating the interest generated by a bond because it considers the impact of ... Read Full Answer >>
  5. What is the difference between shareholder equity and net tangible assets?

    Shareholders' equity and net tangible assets are listed in a company's balance sheet and respectively express the company's ... Read Full Answer >>
  6. How can I determine the degree of financial leverage (DFL) for a particular company?

    Fundamental analysis uses the degree of operating leverage (DFL) to determine the sensitivity of a company's earnings per ... Read Full Answer >>
Related Articles
  1. Markets

    A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  2. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  3. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  4. Trading Strategies

    Knowing When To Hold And When To Sell

    When deciding whether to sell or hold on to a stock, use the "partial sell" strategy as a way to minimize risks and ensure that you make some profits.
  5. Professionals

    Characteristics Of Successful Traders

    Successful traders share psychological characteristics that augment their personal and financial power.
  6. Investing Basics

    Gain The Needed Insights To Spot Stock Pick Scams

    Uneducated traders are often ensnared by "hot stock pick" scams, but educated traders use key insights to make well-timed trade entries and exits.
  7. Investing

    Finding A Discount On Your Next Bond Investment

    Discount rates have nothing to do with buying things on sale. Rather, it helps you figure out how much to pay today for a bond or cash flow in the future.
  8. Investing

    How Much Is Your Investment Worth? A Look At TVM

    Investors are always searching for ways to calculate what an investment is worth. What will the money we invest today be worth in 5, 10, or even 50 years?
  9. Investing Basics

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  10. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!