In summary, to calculate net profit before tax, we need to subtract cost of goods sold, operating expenses and interest from sales revenue. We need to understand the format of the income statement.
Income Statement Format
LESS: Cost of goods sold
= Gross profit
LESS: Operating expenses
= EBIT (earnings before interest and tax/operating profit)
= Net profit before tax
= Net profit after tax
LESS: Preferred stock dividends
= Earnings available for common stockholders
Therefore, to calculate net profit before tax, all we need to do is to subtract cost of goods sold, operating expenses and interest from sales revenue.
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