Bait are the acronyms for earnings before interest and taxes and it is widely used in the accounting and financial world as indicative of the exploitation of a certain company or company. It is a magnitude that companies offer at the stock market level to measure and compare certain results related to the company.
In this article you will find:
Formula and uses of Bait
As we mentioned, it is fundamental in financial analysis, since its results are easily comparable between companies and by including interest or tax, it allows a clear look without leaving room for any doubts or discrepancies. Some of its uses include the Dupont analysis and the calculation of ROE, which is important to know the return on capital.
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- Its formula is: BAIT = Income - Cost of goods sold - Operating expenses
Aspects to consider about the Bait
You should know that the BAIT does not recognize or distinguish the type of income received through credits in this way the value that you have borrowed will also be reflected in this indicator, in this way this It was not a profit obtained through production, so it will be increased and in a certain way it will not be exact, for this reason this is usually considered as an indicator approximate.
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Bait analysis
We must start by indicating that when analyzing the results obtained over a period of time For a given company, you start with the income derived from sales, until you reach the benefit net. This final benefit can be separated or decomposed to know every detail about the performance of the company during the period of time that is being studied.
This analysis is made to show a phase prior to net profit or as it is also known, final profits, here it will be obtained information about commercial and industrial activities, all this without taking into account financial structure and taxes existing.
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Elements of an income statement
The standard income statement typically includes the following items:
- Net sales, which must include taxes, discounts among others and here the cost of sale is also included
- Another element in this account is the gross margin, operating expenses including maintenance and administration.
- BAAIT, which are earnings before amortization, taxes and interest
- This account will include the BAIT, financial income, extraordinary items, among others.
Difference between net income and net profit after taxes
This is an important aspect whether you are interested in making investments or if you are in a management position in which it is necessary to know a little about the world of economics and finance.
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Here it is important that you have some knowledge about the taxes that can affect the profit of the company, for this reason it is advisable to review the net profit and net profit after taxes.
Net profit
These can be found in the company's income statement and it is defined as what remains after adding each of the income and subtracting each of the different expenses that the company may have herself. Keep in mind that the utility is the income from which the various expenses have not yet been subtracted.
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Net profit
This term is defined as the income that remains after taxes, it is obtained by adding all the profits and subtracting them between the expenses, taxes and cost of goods sold, although it is basically the same as net income, it is worth noting that this appears frequently in what It is known as financial statements of companies in order to differentiate between benefits before and after subtracting the different taxes.
