FUNdamentals of Financial Statements: It's easier than you think by Ananda Chinmay

Author:Ananda, Chinmay [Ananda, Chinmay]
Language: eng
Format: epub, azw3
Published: 2016-04-09T21:00:00+00:00

After PBIT, business has to pay the interest, which is 10% to the bank. 10% of $300,000 for company ’A’ would be $30,000 and for company ‘B’ 10% of $700,000 would be $70,000. Now if we subtract interest from PBIT we will get PBT i.e. Profit Before Tax (It is also called EBT – Earnings Before Tax). For company ‘A it is $270,000 and for company ‘B’ it is $230,000.

Let us assume the tax rate to be 30%. So the tax for company ‘A’ would be $81,000 (30% of 270,000) and for company ‘B would be $69,000 (30% of 230,000). Now we will get PAT i.e. Profit After Tax. It is also called Net Profit. It is $189,000 for company ‘A’ and $161,000 for company ‘B’.

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