EAT (PAT) is the total profit/loss after tax from continuing operations, OR more often the total profit/loss after tax (i.e. including the profit/loss from discontinued operations).   It is therefore EBT with income tax or possibly also profit/loss from discontinued operations. Continuing or


EAC's is total profit/loss after tax, after allocation to statutory reserve and dividend payments to the owners of preferred shares. (18) EAC = Earnings Available for Common stockholders

Reconciliation of Operating income, EBITDA, EBIT (PBIT), EBT (PBT), EAT (PAT), Net income and EAC to IFRS

At the outset, it is necessary to mention that the below stated reconciliation is neither official nor binding and some terms are in fact not fully comparable (e.g. Operating income and EBIT/EBITDA). Although the profit forms mentioned below are very favourite, they mostly

Systematic risk

Systematic risk is the undiversifiable risk to which are exposed all companies in the market. An example can be the risk of changes of most macroeconomic factors. (43) The fact that systematic risk cannot be diversified does not mean that it cannot be dealt with – it can be for example insured

Security market line (SML)

Security market line (SML) reveals the relationship between the level of systematic risk and the expected return and as such presents the outputs of Capital Asset Pricing Model (CAPM). The slope of the curve represents coefficient β. (42) SML line is used to derive expected (= well priced) ret

Average annual growth rate (AAGR)

Average annual growth rate (AAGR) calculates average annual growth rate from time series based on the formula: (grow rate during period 1 + grow rate during period 2 + grow rate during period 3 + …………+ grow rate during period n ) / number of periods of grow   Be c

Net income

Net income is the total profit/loss (that is, including net profit/loss from discontinued operations), sometimes shown after deduction of profit/loss attributable to non-controlling interest (minority interest).


There are many definitions of NOPAT, therefore the use of this indicator is quite misleading. Common definition is: profit/loss on ordinary activities after taxation without taxed interest expense (i.e.  interest expense is adjusted for the effect of tax savings resulting from the interest exp

Cost of capital

Cost of capital is the cost rate of the funds that the company uses as its capital, therefore the rate that mixes costs of various sources of finance. It usually has the form of Weighted Average Cost of Capital (WACC), but all the components mentioned below can be also called with the broader term &

Unsystematic risk

Unsystematic risk is the diversifiable risk specific to the considered company, e.g. risk resulting from geographic location. Since unsystematic risk is diversifiable risk, the risk can be eliminated by holding a well-balanced portfolio and the total risk is equal just to the level of systematic ris

Gordon growth model (Dividend discount model)

Gordon growth model (Dividend discount model) uses the assumed relationship of the constantly growing dividend amount received in perpetuity and the share price and is used to (39):   calculate market value of share (equity) = present value of future dividends P0 = D1 / (Ke – g) &n

Hurdle rate

Hurdle rate is the minimum return rate that the company wants to exceed when it undertakes an investment project. It is often (but not always) the company´s cost of capital (WACC). Hurdle rate is therefore often used as a discount rate in DCF calculations and the project´s IRR % shall ex

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