Below are some examples of PAT.
Last Updated :
21 Aug, 2024
Blog Author :
Edited by :
Ashish Kumar Srivastav
Reviewed by :
Dheeraj Vaidya, CFA, FRM
What is Profit After Tax?
Profit after tax (PAT) can be termed as the net profit available for the shareholders after paying all the expenses and taxes by the business unit. The business unit can be any type, such as private limited, public limited, government-owned, privately-owned company, etc.
Tax is an integral part of an ongoing business. After paying all the operating expenses, non-operating expenses, interest on a loan, etc., the business is left out with several profits, known as profit before tax or PBT. After that, the tax is calculated on the available profit. Finally, after deducting the taxation amount, the business derives its net profit or profit after tax (PAT).
The Formula of Profit After Tax
The formula of PAT can describe as below:
Profit After Tax (PAT) = Profit Before Tax (PBT) – Tax Rate
After calculating, the taxable amount is subtracted from PBT to get profit after-tax or Net profit. However, in the case of negative profit before tax (when total expenses exceed total revenue), the taxable component is not required. Therefore, tax is only applicable in the case of profitability.
Example #1
Suppose ABC private limited earns revenue of $ 500, and its operating and non-operating expenses stand at $150 and $68, respectively. The tax rate stands at 30%. Calculate profit after tax (PAT) for the company.
Solution:
From the above data, we get the following information.
Thus, if we deduct Non operating expenses and operating expenses from revenue, we would profit before tax.
Now calculate the Taxable amount by using PBT and the given tax rate.
Therefore as per formula
Example #2
Suppose Australia and New Zealand Banking Group Limited earn revenue of $ 14,514, and its operating and non-operating expenses stand at $6,508 and $3,250, respectively. The tax rate stands at 28%. Calculate net profit after tax for the company.
Solution:
From the above data, we get the following information.
Thus, if we deduct Non operating expenses and operating expenses from revenue, we would profit before tax.
Now calculate the Taxable amount by using PBT and the given tax rate.
Therefore, as per the formula.
Advantages
All the above conditions are applied for profitability, higher revenue, and lower expenses.
Disadvantages
Limitations
Important Points
Conclusion
Profit after tax or Net profit or the bottom line is denoted by the earnings left after incurring all the expenses by the company. Therefore, higher profitability denotes higher PAT and lowers profitability denotes lower profit after tax. However, loss or profit from exceptional items sometimes leads to abnormal decreases, increases in profitability,y or even losses.
Sometimes, a tax rebate is adjusted, and a refund is added to the loss amount, which might reduce losses. PAT is the primary aspect of any business which determines the future of the particular business, as the remaining profitability is for further expansion through capital expenditure.
Table Of Contents
Below are some examples of PAT.