PATMI

Table of Contents

PATMI
What is PATMI?
Understanding PATMI
Formula of PATMI
How to calculate PATMI?
Example of PATMI
Frequently Asked Questions

PATMI

Profit after tax and minority interest plays a crucial role in finance. It functions as a critical indicator of a company’s financial performance. Stakeholders are given a clearer picture of the company’s profitability by analysing the net income produced after taxes and accounting for minority interests. This essential data makes it easier to assess the company’s capacity to turn a profit, pay dividends, and make the necessary expenditures for expansion in the future.

What is PATMI?

A financial indicator called profit after tax and minority interests, or PATMI, is used to evaluate a company’s profitability. After taxes and the share of the minority interests in the subsidiary or joint venture have been considered, PATMI is the net profit attributable to the company’s shareholders. It indicates financial performance and displays the earnings produced by the company’s core businesses. PATMI is frequently used in financial analysis and reporting to assess a company’s profitability and viability since it sheds light on its profit capacity.

Understanding PATMI

Profit after tax is a business’s net income after all relevant taxes have been subtracted from its revenue. It indicates the profit left over for the company’s shareholders after paying taxes. The net income that belongs to the company’s shareholders (after taxes) and is attributable to non-controlling minority shareholders in subsidiaries or related entities is profit after tax and minority interest. It aids in comprehending how profits are distributed among different stakeholders in a company’s financial statements.

Analysts and investors typically use this statistic to analyse a company’s financial performance and compare it to other companies in a similar industry.

There are two components of PATMI. The first is the profit-after-tax component of PATMI, which is the amount of money that a company earns after paying all of its taxes. It considers the company’s income, expenses, and taxes levied by the government. This metric is important because it clearly shows how much money a company is earning after accounting for all of its expenses.

The second is the minority interests’ component; PATMI is the portion of profits that belong to minority shareholders. These shareholders own less than 50% of the company’s shares but still hold some ownership. This component is crucial because it reflects the share of profits that belong to minority shareholders, which can be significant in some cases.

Understanding Profit After Tax and Minority Interests (PATMI) is essential for investors and analysts who want to accurately evaluate a company’s financial performance. It offers a thorough analysis of a business’s profitability by accounting for taxes and minority interests, which can be critical in making informed investment decisions.

Formula of PATMI

The formula for calculating PATMI is as follows:

PATMI = net profit – tax expense – minority interest

Where,

Net profit = The total profit earned by the company before accounting for taxes and minority interests.
Tax expense = The amount of taxes the company makes on its earnings.
Minority interest = The portion of the subsidiary or joint venture’s profit attributable to minority shareholders.

How to calculate PATMI?

The following steps should be followed to calculate PATMI:

The income statement of the company will contain the net profit amount. The company’s overall profit is before taxes and minority interests are considered.
Calculate the company’s period-to-period tax expense. The income statement or financial statements often include this information.
Determine the percentage of profits attributable to minority shareholders in subsidiaries or joint ventures. The financial statements typically include this information, especially in the consolidated statement of profit or loss.
Subtract the minority interest and tax expense from the net earnings. The resulting number represents PATMIs.

Example of PATMI

Consider the following example to understand the calculation of PATMI. Let’s say ABC Corporation announces a net profit of US$1,000,000. The subsidiary’s profit is split into a US$60,000 minority interest and a US$300,000 tax expense for the period.

To calculate PATMI, subtract the tax expense and minority interest from the net profit:

PATMI = Net profit – Tax expense – Minority interest = US$1,000,000 – US$300,000 – US$60,000 = US$640,000

The profit available to the company’s shareholders after taxes and accounting for the minority shareholders’ part of the subsidiary’s profit is US$640,000 the PATMI for ABC corporation.

Frequently Asked Questions

What is a minority interest in valuation?

Minority interest, in valuation, is the fraction of equity attributable to non-controlling shareholders and refers to the ownership stake in a company held by persons or entities that do not have control or a majority ownership position.

How to calculate minority interest?

Determine the percentage of a subsidiary’s equity that non-controlling shareholders own, then multiply that percentage by the subsidiary’s net income or equity value to calculate the minority interest.

Is minority interest part of net worth?

Minority interest, which indicates the ownership stake held by non-controlling shareholders in the firm’s subsidiaries or affiliates, is often regarded as a part of a corporation’s net worth or equity.

What are the benefits of a minority interest in business?

The following are the benefits of a minority interest in a business:

Diversification of investment assets is made possible by holding a minority interest in a company. It lowers total investment risk by exposing diverse businesses, markets, and industries.
Minority shareholders can nevertheless reap the company’s progress and profitability rewards. If the business does well, they may profit from their investment through dividends or capital gains.
Minority shareholders occasionally may have specialised knowledge or experience in a particular industry. They can give their expertise to the company and possibly help its operations by owning a minority interest.
A potential escape option is made possible by holding minority ownership. Minority shareholders may choose to sell their shares at a profit if the company attracts more investors or grows significantly.
Minority shareholders often have minimal responsibility to protect their assets if the firm encounters legal or financial difficulties.
Minority shareholders may not hold the majority of the shares. The power to vote and representation on the board of directors, which gives them a voice in critical decision-making processes, are some of the rights and influence they may still possess.