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After-tax profit margin

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Definition of After-tax profit margin

After-tax Profit Margin Image 1

After-tax profit margin

The ratio of net income to net sales.



Related Terms:

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.


Asymmetric taxes

A situation wherein participants in a transaction have different net tax rates.


Average tax rate

taxes as a fraction of income; total taxes divided by total taxable income.


average tax rate

Total taxes owed divided by total income.


Before-tax profit margin

The ratio of net income before taxes to net sales.



Book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.


Break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering
into and not entering into the transaction.


After-tax Profit Margin Image 2

Buy on margin

A transaction in which an investor borrows to buy additional shares, using the shares
themselves as collateral.


Cash flow after interest and taxes

Net income plus depreciation.


cash flow from operating activities, or cash flow from profit

This equals the cash inflow from sales during the period minus the cash
outflow for expenses during the period. Keep in mind that to measure
net income, generally accepted accounting principles require the use of
accrual-basis accounting. Starting with the amount of accrual-basis net
income, adjustments are made for changes in accounts receivable,
inventories, prepaid expenses, and operating liabilities—and depreciation
expense is added back (as well as any other noncash outlay
expense)—to arrive at cash flow from profit, which is formally labeled
cash flow from operating activities in the externally reported statement
of cash flows.


Contribution margin

The difference between variable revenue and variable cost.


contribution margin

An intermediate measure of profit equal to sales revenue
minus cost-of-goods-sold expense and minus variable operating
expenses—but before fixed operating expenses are deducted. profit at
this point contributes toward covering fixed operating expenses and
toward interest and income tax expenses. The breakeven point is the
sales volume at which contribution margin just equals total fixed
expenses.


contribution margin

the difference between selling price and
variable cost per unit or in total for the level of activity; it
indicates the amount of each revenue dollar remaining
after variable costs have been covered and going toward
the coverage of fixed costs and the generation of profits


Contribution margin

The margin that results when variable production costs are subtracted
from revenue. It is most useful for making incremental pricing decisions
where a company must cover its variable costs, though perhaps not all of its fixed
costs.


contribution margin ratio

the proportion of each revenue dollar remaining after variable costs have been covered;
computed as contribution margin divided by sales


Controllable profit

The profit made by a division after deducting only those expenses that can be controlled by the
divisional manager and ignoring those expenses that are outside the divisional manager’s control.


After-tax Profit Margin Image 3

Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.


Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.



Cost–volume–profit analysis (CVP)

A method for understanding the relationship between revenue, cost and sales volume.


cost-volume-profit (CVP)

analysis a procedure that examines
changes in costs and volume levels and the resulting
effects on net income (profits)


Current Income Tax Expense

That portion of the total income tax provision that is based on
taxable income.


Current Tax Payment Act of 1943

A federal Act requiring employers to withhold income taxes from employee pay.


Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.


Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.


Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.


Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.


Depreciation tax shield

The value of the tax write-off on depreciation of plant and equipment.


depreciation tax shield

Reduction in taxes attributable to the depreciation allowance.



Dollar safety margin

The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
strategy.


Double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.


earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.


Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.


Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.


Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.


Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.


EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.


EBITDA Margin

EBITDA divided by total sales or total revenue.


Effective margin (EM)

Used with SAT performance measures, the amount equaling the net earned spread, or
margin, of income on the assets in excess of financing costs for a given interest rate and prepayment rate
scenario.


Effective Tax Rate

The total tax provision divided by pretax book income from continuing
operations.


Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.


Equivalent taxable yield

The yield that must be offered on a taxable bond issue to give the same after-tax
yield as a tax-exempt issue.


Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.


Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.


Gross margin

Revenues less the cost of goods sold.


gross margin, or gross profit

This first-line measure of profit
equals sales revenue less cost of goods sold. This is profit before operating
expenses and interest and income tax expenses are deducted. Financial
reporting standards require that gross margin be reported in
external income statements. Gross margin is a key variable in management
profit reports for decision making and control. Gross margin
doesn’t apply to service businesses that don’t sell products.


GROSS PROFIT

The profit a company makes before expenses and taxes are taken away.


Gross profit

The difference between the price at which goods or services are sold and the cost of sales.
Income The revenue generated from the sale of goods or services.


Gross profit

The result of subtracting cost of goods sold from sales. Synonymous with gross margin.


Gross Profit

Revenue less cost of goods sold.


Gross profit margin

Gross profit divided by sales, which is equal to each sales dollar left over after paying
for the cost of goods sold.


Gross Profit Margin

Gross profit divided by revenue.


Imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid.


INCOME TAX

What the business paid to the IRS.


Income tax

A government tax on the income earned by an individual or corporation.


Income Tax Expense

See income tax provision.


Income Tax Provision

The expense deduction from pretax book income reported on the
income statement. It consists of both current income tax expense and deferred income tax
expense. The terms income tax expense and income tax provision are used interchangeably.


Indirect Taxes

taxes paid by consumers when they buy goods and services. A sales tax is an example.


Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.


Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of
governors of the Federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.


Interest equalization tax

tax on foreign investment by residents of the U.S. which was abolished in 1974.


Interest tax shield

The reduction in income taxes that results from the tax-deductibility of interest payments.


interest tax shield

tax savings resulting from deductibility of interest payments.


Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).


Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.


Limited-tax general obligation bond

A general obligation bond that is limited as to revenue sources.


Maintenance margin requirement

A sum, usually smaller than -but part of the original margin, which must
be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the
maintenance margin level, the broker must issue a margin call for the amount at money required to restore the
customer's equity in the account to the original margin level. Related: margin, margin call.


Margin

This allows investors to buy securities by borrowing money from a broker. The margin is the
difference between the market value of a stock and the loan a broker makes. Related: security deposit (initial).


Margin

The amount added to a lower figure to reach a higher figure, expressed as a percentage of the higher figure, e.g. the margin that profit represents as a percentage of selling price.


Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.


Margin call

A demand for additional funds because of adverse price movement. Maintenance margin
requirement, security deposit maintenance
margin of safety With respect to working capital management, the difference between 1) the amount of longterm
financing, and 2) the sum of fixed assets and the permanent component of current assets.


Margin of safety

A measure of the difference between the anticipated and breakeven levels of activity.


margin of safety

the excess of the budgeted or actual sales
of a company over its breakeven point; it can be calculated
in units or dollars or as a percentage; it is equal to
(1 - degree of operating leverage)


Margin requirement (Options)

The amount of cash an uncovered (naked) option writer is required to
deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes.


Margin Tax Rate

The tax rate applicable to the last unit of income.


Marginal

Incremental.


Marginal cost

The cost of producing one extra unit.


Marginal cost

The incremental change in the unit cost of a product as a result of a
change in the volume of its production.


Marginal Propensity to Consume

Fraction of an increase in disposable income that is spent on consumption.


Marginal Propensity to Import

Fraction of an increase in disposable income that is spent on imports.


Marginal Propensity to Save

Fraction of an increase in disposable income that is saved.


Marginal tax rate

The tax rate that would have to be paid on any additional dollars of taxable income earned.


marginal tax rate

Additional taxes owed per dollar of additional income.


Marginal Tax Rate

Percent of an increase in income paid in tax.


Net Cash after Operations

Cash flow available for debt service—the payment of interest and principal on loans. Generally calculated as cash provided by operating activities before interest
expense.


Net operating margin

The ratio of net operating income to net sales.


Net profit

See operating profit.


Net profit margin

Net income divided by sales; the amount of each sales dollar left over after all expenses
have been paid.


Operating profit

The profit made by the business for an accounting period, equal to gross profit less selling, finance, administration etc. expenses, but before deducting interest or taxation.


operating profit

See earnings before interest and income tax (EBIT).


Operating profit margin

The ratio of operating margin to net sales.


Original margin

The margin needed to cover a specific new position. Related: margin, security deposit (initial)


Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).


Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.


Personal tax view (of capital structure)

The argument that the difference in personal tax rates between
income from debt and income from equity eliminates the disadvantage from the double taxation (corporate
and personal) of income from equity.


phantom profit

a temporary absorption costing profit caused
by producing more inventory than is sold


product contribution margin

the difference between selling price and variable cost of goods sold


product line margin

see segment margin


PROFIT

What’s left over after you subtract the cost of goods sold and all your expenses from sales.


Profit

The difference between income and expenses.



 

 

 

 

 

 

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