Pre-Depreciation Profit

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DEFINITION

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 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.




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