Pretax Earnings

What are 'Pretax Earnings'

Pretax earnings are a company's earnings after all operating expenses, including interest and depreciation, have been deducted from total sales or revenues, but before income taxes have been subtracted. Because pretax earnings exclude taxes, this measure enables the intrinsic profitability of companies to be compared across locations where corporate taxes differ.

Also known as "pretax income" or "earnings before tax".

BREAKING DOWN 'Pretax Earnings'

For example, a manufacturer with revenues of $100 million in a fiscal year may have $90 million in total operating expenses (including depreciation and interest expenses), excluding taxes. In this case, pretax earnings amount to $10 million. The after-tax earnings figure, or net income, is computed by deducting income taxes from pretax earnings of $10 million.

RELATED TERMS
  1. Pretax Profit Margin

    A company's earnings before tax as a percentage of total sales ...
  2. Pretax Rate Of Return

    The rate of return on an investment that does not take the taxes ...
  3. Pretax Operating Income - PTOI

    An accounting term that refers to the difference between a company's ...
  4. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  5. Operating Earnings

    Profit earned after subtracting from revenues those expenses ...
  6. Profit Before Tax - PBT

    A profitability measure that looks at a company's profits before ...
Related Articles
  1. Investing

    What is Profit Before Tax?

    Profit before tax measures a company’s profits before it pays corporate income tax.
  2. Investing

    Calculating Net of Tax

    Net of tax is a figure that has been adjusted for taxes.
  3. Investing

    Understanding the Income Statement

    The best way to analyze a company—and figure out if it's worth investing in—is to know how to dissect its income statement. Here's how to do it.
  4. Personal Finance

    What's a Marginal Tax Rate?

    The marginal tax rate is based on a progressive tax system, where tax rates for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon ...
  5. Markets

    What are Earnings?

    The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year.
  6. Personal Finance

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  7. Personal Finance

    Explaining Double Taxation

    Double taxation refers to income taxes being imposed twice on the same source of earned income.
  8. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  9. Personal Finance

    The Most Controversial Tax Deductions

    When it comes to taxes, it's hard to make people happy but these deductions raised more than the average amount of controversy.
  10. Personal Finance

    Deferred Tax Asset

    A Deferred Tax Asset is an asset on a company’s balance sheet that may be used to reduce taxable income. It is the opposite of a deferred tax liability, which describes something that will increase ...
RELATED FAQS
  1. Does the IRA deduction limit from line 32 on 1040 include the 401k contribution that ...

    I have a 401k through work and had around $3,400 taken out of my pre-tax pay for this plan. Can I also contribute to an IRA ... Read Answer >>
  2. How are effective tax rates calculated from income statements?

    Learn how to read an income statement and how to find the information necessary to calculate a company's effective income ... Read Answer >>
  3. What is the tax impact of calculating depreciation?

    Understand the tax implications of a company's depreciation. Learn how differences in accounting methods change the amount ... Read Answer >>
  4. How can I lower my effective tax rate without lowering my income?

    Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning tax-free ... Read Answer >>
  5. What is the difference between earnings and revenue?

    Understand how a company makes revenue and how it makes earnings. Learn the difference between revenue and earnings and how ... Read Answer >>
  6. How does the effective tax rate for an individual differ from that of a corporation?

    Read about the effective tax rate for individuals when compared with the effective tax rate for corporations, including how ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center