PreTax income is best described as

• A. Net Income
• B. Operating Income plus or minus Other Revenue/Expense
• C. Cash Flows from Operations
• D. Total Assets minus Total Liabilities

Answer: (B)

Pre-tax income, or earnings before tax, represents what the company earns from its operations before paying income taxes. It starts with operating income and then adds or subtracts other revenue and expense items that come from activities outside normal operations, such as interest income or interest expense, gains or losses on investments, and other non-operating items. Net income is after taxes, cash flows from operations is a separate cash-based metric, and total assets minus total liabilities equals equity. So describing pre-tax income as operating income plus or minus other revenue/expense captures the full picture of income before tax.