Profit After Tax

Profit after tax or a gain after tax is essentially the amount of money that remains with the taxpayer after all the necessary deductions have been made. It is like a barometer that tells you how much profit a business has really earned.

Profit After Tax is the total amount that a business earns after all tax deductions have taken place. It is used as a barometer to determine how much a business really earns and how much it can utilise for it’s day to day activities. Profit after tax is also seen as a measure of a company’s profitability after all its expenses have been deducted and can be fully utilised by the company to conduct its business. Shareholders are also paid dividends from this amount.

After-Tax Profit Margin

The After-Tax Profit Margin is a financial performance ratio wherein the percentage of a company’s revenue is calculated after all operating expenses, interest, taxes and stock dividends have been deducted from the company’s total revenue.

How is After-Tax Profit Margin Calculated?

After-Tax Profit Margin can be calculated by using the following formula:

(Total Revenue – Total Expenses)/Total Revenue = Net Profit

Net Profit/Total Revenue = After Tax Profit Margin  

Features of After-Tax Profit Margin

The main features of After-Tax Profit Margin are as follows:

  • It is one of the most important financial concepts
  • It is a measure of how competent a company is with regards to converting its revenue into profits
  • It is used in the process of margin analysis, which is used to compare companies within the same industry
  • It helps investors determine how much a company actually earns
  • It can help determine whether a company needs to control its costs

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