What ratio is calculated as earnings before tax divided by revenue?

What ratio is calculated as earnings before tax divided by revenue? Pre-tax profit margin is the answer.

The formula is earnings before tax divided by revenue, multiplied by 100 when stated as a percentage. It shows how much profit a company generates from sales before the tax charge is deducted, allowing readers to examine profitability without the final tax burden affecting the figure.

Pre-tax profit is also called income before tax, profit before tax, or earnings before income tax. It normally comes after operating profit on an income statement, once items such as interest income, interest expense, and other non-operating gains or losses have been included.

It is easy to confuse this measure with operating profit margin. Operating margin focuses on the business’s operating activities and is generally based on EBIT; pre-tax margin can also reflect financing choices and non-operating results. Net profit margin goes one step further by deducting income tax. Analysts often use pre-tax margin to compare companies facing different tax rates or tax arrangements.