Profit before tax: economic sense and method of calculation.

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Economic activity of any enterprise need to be assessed in order to get an accurate picture of how well the company is managed, what risks there are in front of it to date and what are the prospects for its further development in the future.To do this, the analysis of many economic indicators, among which an important place is given to such as profit before tax.

In order to understand what the economic sense of this indicator, it is necessary first of all to understand what it consists of.Profit before tax consists of income from sales, adjusted for the following indicators, acting as a sort of amendment:

- income or expense related to the operating activities of the enterprise.This category includes revenues and expenses incurred in the company, however, is not directly linked to the sales of goods and services, that is its main activity.These revenues and expenses may arise in the provision of certain assets in lease payments for the use of intellectual property, dividends, was brought into the case of ownership of companies in various securities and so on.

- gains or losses, referred to as non-operating.These revenues and expenses arise in the case naschityvaniya fines or penalty for non-fulfillment of contracts, the payment of penalties, the receipt of any funds donated (as a donation contract), as well as gains or losses of the previous years revealed only in the current accounting year.

Thus, the profit before tax is defined by the formula:
PDO = +/- PP OD / P +/- HP / P.

In this formula, PDO - this is calculated by us figure ML / P - is operating income or expenses, and HP / P - income or expenses that are classified as non-operating.

As we can see, pre-tax profit is an intermediate measure between profit from sales and net profit.You have to understand that it is important for the economic analysis is not just the value of the indicator on the principle of "more - so without fail better", and a greater role played by the structure of this indicator.Since the pre-tax profit includes three main components, it is also important to define the relationship between them.The higher the proportion of income from sales and the lower the proportion of other components, the better and more effectively, a system of enterprise management, and vice versa - the higher the proportion of casual income and expenses, the worse it established a mechanism of the firm.The value of pre-tax profits can be very high, however, if the share of the profits from sales of its relatively small, which means that the company exists only by occasional income stream which can stop at any time.Thus, analyzing the structure of the index, conclusions can be drawn about the quality management system by the firm.

As you can see, the profit before tax is an important indicator of the economic condition of the company.His analysis can tell a lot about how the company is developing, how well it is managed, and what are the future prospects of its development.This indicator is required to be included in the financial statements of the Company and is shown in the income statement and in the statement of profit and loss account of the company.The correct calculation of the figures will help to inform contractors and potential investors about how effective will their investments, how reliable is the object of investment and how much they will receive in the future.After the calculated pre-tax profit from it begin to deduct the amount of tax that must pay the company, and thus calculate the net profits of the enterprise - its main financial results.