Profit Definitions

One 'Profit' is a word widely used in business, particularly when Valuing a Business.  However what type of 'Profit' is being referred to?

Here are some of the key 'Profit' definitions:

Gross Profit

Name for the figure when all Direct Costs are deducted from the Revenue; often expressed as a percentage of Revenue eg. 40% Gross Profit.

EBITDA

This stands for Earnings before Interest Tax Depreciation and Amortisation.  Sometimes seen as equivalent to a crude cash flow, however this is no substitute for a fully worked cash flow model.

Operating Profit

Name for the Profit when all Indirect costs are deducted from the Gross Profit.

Pre Tax Profit

This is the Operating Profit less interest and other financing effects .

Post Tax Profit

Pre Tax Profit less UK Corporation Tax. 

Which 'Profit' to use? Why not contact us to ask our opinion?

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