Income statement: distinction between profit from operations, profit for the year before tax, profit for the year after tax
A limited company's income statement shows three separate profit figures. Each one deducts a different cost, so they get progressively smaller as you move down the statement.
Formula
Profit from operations = Gross profit − Operating expenses; Profit before tax = Profit from operations − Finance costs; Profit after tax = Profit before tax − Tax
Real World
In 2023, Tesco reported strong profit from operations but a much lower profit after tax once finance costs on its large debt and corporation tax were deducted — showing why each subtotal tells a different story.
Exam Focus
Always label each profit subtotal clearly; examiners deduct marks if finance costs are subtracted before 'profit from operations' rather than after.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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