What is Profit Before Tax (PBT) in Finance?

Profit before tax (PBT) in finance, also known as earnings before tax (EBT), is a key financial metric measuring a company's profitability before it deducts corporate income tax. PBT in finance represents the residual income left after covering all operating expenses, including financing costs like interest expense, but excluding tax charges.

Profit Before Tax Formula:

PBT can be calculated in two ways:

1. PBT = Operating Profit - Interest Expense

2. PBT = Revenue - Operating Expenses - Interest Expense - Cost of Goods Sold

What is the difference between PBT and EBITDA

Both PBT and EBITDA are widely used profitability measures, but they differ in what they exclude:

PBT: Excludes only income tax, representing a company's profit from core operations before tax obligations.
EBITDA: Excludes income tax, depreciation, amortization, and interest expense, offering a view of profit generation solely through operational activities.

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