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Pre Tax Margin is a measure of the operating efficiency of a company. Pretax margin is usually expressed as a percentage of revenues. Since pretax margin evaluates the relationship between operating income and revenues, it is also considered a measure of the profitability of the company.
The calculation of pretax margin is as follows:
Pretax Margin (%) = (Operating Income / Revenues) x 100
Profit margins can vary significantly between industries; therefore, comparisons of pretax margin should be made between companies making similar products. |
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