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Profit After Tax (Pat)

calender iconUpdated on August 07, 2023
corporate finance and accounting
financial ratios

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The profit after tax pat is calculated by subtracting the total tax expense from the gross profit.

Formula:

Profit after tax PAT = Gross profit - Total tax expense

Explanation:

  • Gross profit: The total revenue generated by the company after subtracting cost of goods sold.
  • Total tax expense: The total amount of taxes paid to the government, including corporate income tax, sales tax, and other applicable taxes.
  • Profit after tax PAT: The remaining profit after all taxes have been paid.

Additional notes:

  • The tax rate used to calculate the tax expense should match the applicable rate for the company’s jurisdiction.
  • The tax expense can include both current and deferred taxes.
  • The profit after tax PAT is used to calculate other financial ratios, such as return on investment (ROI) and return on equity (ROE).

Example:

Gross profit = $100,000Tax rate = 20%Total tax expense = $20,000Profit after tax PAT = $100,000 - $20,000 = $80,000

Therefore, the profit after tax pat for the company is $80,000.

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