Pretax Earnings

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DEFINITION of 'Pretax Earnings'

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.

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