What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


How to Calculate Comprehensive Income Net of Tax

Original post by Mark Kennan of Demand Media

Investors look at a company's pretax and after-tax profits.

The comprehensive income net of tax represents a company's profits after all costs accounted for in the budget, including taxes. Some companies report their pretax income because taxes can vary from year to year depending on different tax breaks. However, if you want to know a company's true profit for a year, you need to calculate the comprehensive income net of taxes, because even if taxes were unusually high in a given year, that money still cannot be passed on to shareholders.

Contents

Step 1

Add the company's operating expenses, costs of goods sold and interest expenses to find the company's total cost before taxes. For example, if the company has $1.2 million in operating expenses, $3 million in costs of goods sold and $200,000 in interest expenses, then the company's total costs are $4.4 million.

Step 2

Subtract the costs from the revenue to find the company's pretax income. In this example, if the company has $7 million, subtract $4.4 million from $7 million to get a pretax income of $2.6 million.

Step 3

Add all of the taxes the company pays during the year to find the company's total taxes. For example, if the company pays $600,000 in state taxes and $1 million in federal taxes, add $600,000 to $1 million to get $1.6 million in total taxes.

Step 4

Subtract the total taxes from the pretax income to find the comprehensive income net of tax for the company. In this example, subtract $1.6 million in taxes from the pretax income of $2.6 million to find that the comprehensive income net of tax for the company is $1 million.


                   

References

About the Author

Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.

Photo Credits

  • Jupiterimages/Goodshoot/Getty Images


Advertisement