Pretax Margin Definition and Explanation

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Quick Definition

Determines the level of profitability given its present sales before taxes are considered.

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Pretax Margin Formula

Explanation of Pretax Margin

The Pretax Margin measures how well a company can generate before-tax profits at the current level of sales.

Importance of Pretax Margin

As with any margin, a high or increasing Pretax Margin is usually a positive sign, showing the company is able to keep its operations costs low, while being able to pull in strong earnings. The Pretax Margin varies greatly between industries, so you will have to compare the results for the company you are analyzing to industry averages.