Explanation

Calculation of recurring/core pretax earnings:

Given:

• Profit before tax: $2.0 billion
• Non-recurring expenses: $0.6B + $0.4B = $1.0 billion

Formula: Recurring pretax earnings = Reported profit before tax + Non-recurring expenses

Calculation: $2.0 billion (reported profit) + $1.0 billion (non-recurring expenses) = $3.0 billion

Why add back non-recurring expenses:

• Non-recurring expenses (acquisition, divestiture, restructuring) are one-time items
• To get core/recurring earnings, we need to remove the impact of these non-recurring items
• Adding them back to reported profit gives us the earnings that would have been reported without these one-time charges

Conclusion: The company's recurring or core pretax earnings is $3.0 billion.