Pre-Depreciation Profit

AAA

DEFINITION of 'Pre-Depreciation Profit'

Earnings that are calculated prior to non-cash expenses. Non-cash expenses appear as separate income statement expense line items, but no actual cash is spent on these items. Depreciation costs are generally allocated according to a certain rate or percentage, depending on the depreciation method used.

INVESTOPEDIA EXPLAINS 'Pre-Depreciation Profit'

Pre-depreciation profit is calculated because it provides a cleaner number that can help determine a company's ability to service debt.

Non-expense items lower a company's reported earnings, so a pre-depreciation profit would show a higher profit in comparison to profits calculated after depreciation. Depreciable items include buildings, machinery, furniture, vehicles and equipment.

RELATED TERMS
  1. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  2. Earnings Before Interest, Depreciation, ...

    An earnings metric used in the evaluation of oil, gas and mineral ...
  3. Earnings Before Interest, Depreciation ...

    A measure of the earnings of a company that adds the interest ...
  4. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
  5. Mobile First Strategy

    Mobile first strategy is trend in website development where designing ...
  6. Convention Statement

    A document filed by an insurance or reinsurance company that ...
RELATED FAQS
  1. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  2. How often should a small business owner go through a bank reconciliation process?

    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
  3. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  4. What is the difference between recurring and non-recurring general and administrative ...

    The difference between recurring and nonrecurring general and administrative expenses can best be understood as the difference ... Read Full Answer >>
  5. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  6. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
Related Articles
  1. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  2. Markets

    A Clear Look At EBITDA

    This measure has its benefits, but it can also present earnings through rose-colored glasses.
  3. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  4. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  5. Options & Futures

    EBITDA: Challenging The Calculation

    This measure has a bad rap, but it's still a valuable tool when used appropriately.
  6. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  7. Fundamental Analysis

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  8. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  9. Economics

    Understanding Historical Cost

    Historical cost equals the original purchase price of an asset recorded on a company’s balance sheet.
  10. Economics

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
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!