Tax profit

Tax profit

Tax profit or taxable profit is used to distinguish between accounting profit or earnings (the number that is generally referred to in financial results for public companies and quoted in the press). Taxable profit is the number that is used to calculate profit tax.

For a number of reasons, taxable profit may differ from reported earnings, and may be higher or lower.

Company financial reports often distinguish between profit before tax and after-tax profit.

Example

A company has accounting profit before tax of $100, but due to the use of accelerated depreciation, has a taxable profit of $50. The company pays profit tax at a rate of 20%.

In this simple example, the company would report the following:
#Profit before tax: $100
#Taxable profit: $50
#Taxes: $10
#After-tax profit: $90

Depending on the reason for the differences between profit before tax and taxable profit, the company may show a tax liability or tax asset to account for future taxes. Depending on the circumstances and the accounting standards, taxes paid in cash and taxes shown on the profit and loss statement may also differ.

Taxable profit is rarely shown in the published financial statements. Due to the differences between nominal tax rates and actual taxes paid, analysts sometimes refer to the effective tax rate, which is (actual) taxes divided by profit before tax. In the example above, the effective tax rate would be 10%.


Wikimedia Foundation. 2010.

Нужно решить контрольную?

Look at other dictionaries:

  • After-Tax Profit Margin — A financial performance ratio, calculated by dividing net income after taxes by net sales. A company s after tax profit margin is important because it tells investors the percentage of money a company actually earns per dollar of sales. This… …   Investment dictionary

  • after-tax profit — ➔ profit1 …   Financial and business terms

  • pre-tax profit — ➔ profit1 …   Financial and business terms

  • profit before tax — ˌprofit before ˈtax abbreviation PBT noun [countable, uncountable] ACCOUNTING TAX a company s profit before tax has been taken away: • The company reported a half year profit before tax of £72m. * * * profit …   Financial and business terms

  • pre-tax profit — The profit of a company before deduction of corporation tax …   Big dictionary of business and management

  • after-tax profit — /ˌɑ:ftə tæks ˌprɒfɪt/ noun profit after tax has been deducted …   Dictionary of banking and finance

  • profit — total revenue less total expenses for a period of time calculated in accordance with generally accepted accounting principles. Glossary of Business Terms Revenue minus cost. The amount one makes on a transaction. Bloomberg Financial Dictionary *… …   Financial and business terms

  • profit — noun ADJECTIVE ▪ big, considerable, decent, enormous, fat, good, greater, handsome, healthy, hefty, high …   Collocations dictionary

  • profit — prof|it1 W1S1 [ˈprɔfıt US ˈpra: ] n [Date: 1200 1300; : Old French; Origin: Latin profectus, past participle of proficere; PROFICIENT] 1.) [U and C] money that you gain by selling things or doing business, after your costs have been paid ≠ ↑loss… …   Dictionary of contemporary English

  • profit — / prɒfɪt/ noun money gained from a sale which is more than the money spent on making the item sold or on providing the service offered ♦ profit after tax profit after tax has been paid ♦ to take your profit to sell shares at a higher price than… …   Marketing dictionary in english

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”