How Do You Calculate Pre-Tax Income?
To calculate pre-tax income, use the following formula: pre-tax operating income = gross revenue - operating expenses - depreciation. The pre-tax operating income is the operating income of a company before taxes. Simply put, a company can find its pre-tax income by subtracting its total expenses from the total revenue.
Pre-tax operating income is a means to measure the efficiency of a business. It considers the expenses to operate a company, which directly coincide to the ongoing operations of the company. Pre-tax income is important because it helps to identify the success or failure of the business itself and can pinpoint what needs to change or what should stay the same to maintain a profit.