How do you calculate pre-tax net operating income
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Total operating income less total operating expense = net operating income (or loss if the expenses were higher)
Your income before taxes is your operating income, and your income after taxes is your "net" income. * + Net Sales (Sales - Returns) * - Cost of Goods Sold * ------------------------------------ * = Gross Profit (Gross Margin, Gross Income) * - Operating Expenses * ------------------------------------- * = Operating Income * + Gains (not related to usual operations) * - Losses (not related to usual operations) * ----------------------------------------------------- * = Earnings before Interest and Taxes * - Interest * - Taxes * ------------------------------------------------------ * Net Income
Target Net income = (Target Operating income)-(Target Operating income x Tax rate) Target operating income = (Revenues-Variable costs)- Fixed Costs
Income which is generated by normal business basic operating activities is called net operating income while other income then operating income is called non operating income like interest income or dividend income etc.
Net. Operating. Income. Can. Be. Calculated. By. Using. The. Following. formula. V=EBIT/k0 V=value. of. a firm EBIT=net operating. income or. earnings. before. Interest and tax K0=overall. Cost. Of. Capital