A company's taxes get figured into its profit and loss statements when they report their results. In these situations, companies often break out before-tax income and after-tax income.
The goal here is to let investors know just where the money is going. Operating income is a slightly more specific version of income. It often leaves out certain items, including things like interest and depreciation. Operating income also allows investors to compare companies and parts of companies on a somewhat neutral footing. Like how nerdy baseball fans will take out park effects and create defense-neutral pitching statistics, operating income makes it easier to compare the underlying profitability of different businesses that might run in highly different environments. An example might include a company that has operations in different countries, each with its own tax, accounting, and regulatory framework.
So after-tax operating income gives a dollars-in, dollars-out look at the company's business operations, leaving out things that investors might consider extraneous, like what it costs to run a government, or what it costs to borrow money to start the business in the first place.
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Finance: What are operating profits, net...62 Views
finance a la shmoop.what are gross profits operating profits and net
profits? well the greatest fishing company that walks the earth or swims
the ocean made a fortune last year from selling nets. catching things like well [fish is caught from the ocean]
me. but that's really a different thing and no Bueno. leave us alone. in an
accounting sense net profits come after operating profits that come after gross
profits .and the net thing is well pretty much taxes. so here's an income statement
yeah yeah revenues and then there's the cost of the stuff you're selling. okay
fine. we'll note the nets only cost a little bit to make and you sell them for
a fortune .way overpriced if you ask me. like whatever happened to line fishing
anyway lazy humans. so you have your revenues then your cost of goods sold.
all right well if you subtract those cogs from the revs you get your gross [income statement pictured]
profits. yeah gross just gross and sad frankly like why not eat more chicken
seriously. anyway .so then you have your costs of operating the business you know
overhead. secretaries and insurance and rent and fish-smell deodorizer. and then
you have operating profits after you subtract. them yep you subtract those
right from gross profits. get operating. so you made some number let's call it 10
million bucks why not .you know how many of my brethren died to give you that
money right? blood money. talk to Leo to see about it.
maybe he'll make a movie . anyway let's say the tax rates 30% well you'd pay 3
million in taxes on that 10 million of operating profit to then have net
profits of seven million dollars. lots of profits .there people. yeah hope you can [equation]
sleep at night.
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