What is Profit After Tax (PAT)?

Meaning and Definition:

Profit After Tax (PAT) is the net profit earned by the organization after meeting all expenses and charges, including material costs, all operating expenses, depreciation, interest and income tax.

Formula:

PAT	=	Sales Revenues	−	All Expenses Including Depreciation, Interest, Tax but Excluding Appropriations
OR
PAT	=	PBT	−	Income Tax

Significance:

It is the last line in the profit and loss statement and therefore earned the popular jargon-phrase, bottom-line – which has further expanded into contemporary common English usage, “What is the bottom-line?” Which means, “What does it boil down to?” or “What is final result?”.

PAT does not include post tax appropriations or allocations like dividends or set asides towards reserves because such allocations are not a charge against profits but mere discretionary allocation of profits already earned.

Happy Piglet Loves PAT

Example:

	M/s.Old & Conservative Ltd.	M/s.New & Extravagent Ltd.
Sales	1500.00	1520.00
All Costs & Expenses before Depreciation, Interest, Tax and Appropriations	800.00	810.00
Depreciation	30.00	100.00
Interest	0.10	70.00
Earnings after Depreciation and  Interes but Before, Tax and Appropriations (EBTA or EBT)	669.90	540.00
Non-Operating Income	300.00	150.00
Profit Before Tax (PBT)	969.90	690.00

Conclusion: 

Profit After Tax (PAT) is the bottom-line of the profit and loss statement as well as the investor’s interest in a stock and therefore is the most important and only metric that actually matters.