Profit after tax

Profit after tax, also known as the net result, is the profit a business is left with once all operating costs, financial items and tax have been deducted. It represents the total earnings available to the business after paying all operating costs, interest costs and taxes.

How it is calculated

Profit after tax is calculated by taking the operating profit, adjusting for financial income and financial costs, and then deducting tax. The formula is as follows:

Profit before tax = Operating profit + Financial income – Financial costs

Profit after tax = Profit before tax – Tax

Interest costs on loans are a typical example of a financial cost that is deducted before the tax is calculated. If you skip this step and deduct the tax directly from the operating profit, profit after tax will be wrong for every company that has interest-bearing debt or financial income.

What is it used for?

Profit after tax is an important measure for evaluating the actual profit available to the business once all costs and taxes have been taken into account. It gives investors and stakeholders an insight into the profitability of the business at the net result level.

Tips for improving profit after tax

1. Cost control. Reduce unnecessary operating costs and identify areas where costs can be made more efficient.
2. Tax planning. Explore opportunities to optimise tax payments through lawful tax planning and use of the available tax reliefs.
3. Making the business more efficient. Identify and implement measures to improve efficiency in the business, reduce waste and maximise earnings.
4. Increasing income. Explore opportunities to increase sales, improve pricing or diversify the product range in order to increase the business's income.
5. Financing strategy. Consider different financing options and optimise the capital structure in order to reduce interest costs and improve profit after tax.

Read more about how the key figures in Capassa keep profit after tax updated automatically.