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