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In cash flows we use profit before tax or profit before interest and tax ?
can please elaborate with reference to interest expenses, gains, investment income and others.Profit before tax.
And your elaborate question? Too vague I’m afraid.
Besides, is the video not enough to explain it?
It is but the difficulty is, i am unable to understand when to use profit before tax and when to use profit before interest and tax in cash flows as there are some questions using PBIT. As my question, it was related to the calculation of PBT when SOCI is not given and we have to compute it from the net profit difference between retained earnings of current and subsequent year.
pbt is the start point for the statement of cash flows.
Ok, you may need to calculate the figure. there was a question where the figure given was profit before interest and tax. In your workings, calculate pbt. That’s your start for the SofCF. First thing, add back the ineterst which you have just deducted in the workings. And then, lower down within operating activities, we need to deduct the amount of interest ACTUALLY paid.
OK?
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