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Pre-tax income

Profit after interest but before income tax; the base that the effective tax rate is applied to.

Pre-tax income is operating-income plus or minus everything non-operating: interest-expense, interest-income, other-income-and-expense and results from equity-method-investment stakes.

It is useful as a comparison point because tax rates jump around with one-off settlements and geography, so pre-tax profit can grow smoothly while net-income does not.

Example: Northwind Tools has operating income of $120M, interest expense of $18M and interest income of $30M, giving pre-tax income of $132M. At a 25% effective-tax-rate, net income is $99M.

Related: operating-income, income-tax-expense, effective-tax-rate, net-income, other-income-and-expense

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