Pretax Profit Margin

What is 'Pretax Profit Margin'

Pretax profit margin is a company's earnings before tax as a percentage of total sales or revenues. The higher the pre-tax profit margin, the more profitable the company. The trend of the pretax profit margin is as important as the figure itself, since it provides an indication of which way the company's profitability is headed.

BREAKING DOWN 'Pretax Profit Margin'

For example, suppose that Company A has earnings before tax of $10 million and total sales of $100 million in a given fiscal year. It has a pretax margin of 10%. The profit margin figure also enables profitability to be compared across companies with significant differences in size and scale. Company B, which has $500 million in sales and $40 million in pretax earnings may have substantially higher profitability than company A in dollar terms, but has a lower pretax profit margin of 8%.

RELATED TERMS
  1. Pretax Earnings

    A company's earnings after all operating expenses, including ...
  2. Pretax Operating Income - PTOI

    An accounting term that refers to the difference between a company's ...
  3. Marginal Profit

    Marginal profit is the profit earned by a firm or individual ...
  4. Pretax Contribution

    Any contribution made to a designated pension plan, retirement ...
  5. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, ...
Related Articles
  1. Markets

    Profitability Indicator Ratios

    Learn about profit margin analysis, effective tax rate, return on assets, return on equity and return on capital employed.
  2. Term

    The Difference Between Gross and Net Profit Margin

    To calculate gross profit margin, subtract the cost of goods sold from a company’s revenue; then divide by revenue.
  3. Stock Analysis

    Today's Major Services Sector Movers

    On a good day for the market, the Nasdaq is up 2.4%, the S&P 500 has risen 1.9% and the Dow has moved up 1.7%. The Services sector (IYC) is up 1.7%, underperforming the market overall. The ...
  4. Stock Analysis

    Gold and Silver Stocks Making Big Moves on July 13, 2012

    It's been a good morning for the market. The Nasdaq is trading up 1%; the S&P 500 has increased 1.3%; and the Dow has climbed 1.3%. Underperforming the market overall, the Gold and Silver ...
  5. Stock Analysis

    Oil and Gas Operations Stocks Making Big Moves on June 11, 2012

    The morning has been bad for the market. The Nasdaq is down 0.2%; the S&P 500 is trading down 0.3%; and the Dow has slipped 0.4%. The Oil and Gas Operations sector (DIG) is currently lagging ...
  6. Stock Analysis

    Big Movers on the Services Sector Today

    The market is having a bad day so far: the Nasdaq has slipped 0.2%; the S&P 500 is down 0.3%; and the Dow is trading down 0.4%. The Services sector (IYC) is down 0.3%, underperforming the ...
  7. Entrepreneurship

    What's a Good Profit Margin for a Mature Business?

    How to determine if the amount you clear dovetails with the competition.
  8. Stock Analysis

    Biggest Consumer/Non-Cyclical Sector Movers for June 27, 2012

    The market is doing well so far today. The Nasdaq is trading up 0.7%; the S&P 500 is up 0.7%; and the Dow has increased 0.6%. Underperforming the market overall, the Consumer/Non-Cyclical ...
  9. Stock Analysis

    Biggest Basic Materials Sector Movers for July 9, 2012

    The morning has been bad for the market. The Nasdaq is trading down 0.3%; the S&P 500 has slipped 0.3%; and the Dow has decreased 0.4%. The basic materials sector is the category of stocks ...
  10. Stock Analysis

    Today's Major Energy Sector Movers

    The Nasdaq is trading up 0.2%, the S&P 500 has climbed 0.1% and the Dow has slipped 0.1% so far today. The energy sector is the category of stocks that relate to producing or supplying energy. ...
RELATED FAQS
  1. What's the difference between profit margin and operating margin?

    Find out the differences between a company's gross profit margin, net profit margin and operating margin, and what each metric ... Read Answer >>
  2. What is the difference between operating margin and profit margin?

    Understand the difference between operating margin and profit margin in relation to evaluating a company's profitability ... Read Answer >>
  3. What types of financial margins should investors pay the most attention to before ...

    Learn what types of financial margins, such as profit and cash margins, an investor should pay the most attention to before ... Read Answer >>
  4. What costs are not counted in gross profit margin?

    Explore the various measures of a company's profitability, such as gross, operating and net profit margins, and understand ... Read Answer >>
  5. What is the difference between gross profit margin and operating profit margin?

    Understand the difference between gross profit margin and operating profit margin, two measures of corporate profitability ... Read Answer >>
  6. What are some examples of factors that will affect my profit margin?

    Dive into profit margin, and discover some of the many factors that can influence the profit margin for your company in a ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center