Pretax Operating Income - PTOI

Definition of 'Pretax Operating Income - PTOI'


An accounting term that refers to the difference between a company's operating revenues (from its primary businesses) and its direct expenses (except taxes) tied to those revenues. Pretax operating income excludes non-operating forms of revenue and non-recurring transactions such as capital gains on assets and profits from unrelated investments in other companies (unless its main business is investment in other companies).

Investopedia explains 'Pretax Operating Income - PTOI'


Pretax operating income is one of the best barometers for the basic health of a business, because it measures both the revenue and expenses associated with the company's primary business activities. While taxes must ultimately be subtracted from this amount, viewing the company's primary operations on a pretax basis gives its shareholders and decision-makers a clearer picture into the aspects of profitability that the company can control. It's also important to note that the PTOI helps eliminate a false sense of security or panic associated with certain infrequent occurences like lawsuits, gains or losses on currency exchanges, or the appreciation of capital assets. As these are included in the final accounting of a company's profit or loss, they can create a false sense of security or peril.



comments powered by Disqus
Hot Definitions
  1. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  2. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  3. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  4. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  5. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
  6. Retail Sales

    An aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the U.S., the retail sales report is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce.
Trading Center