Learning Module 9: Analysis of Income Taxes

FINANCIAL STATEMENT ANALYSIS

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Effective Tax Rate

\(\text{effective tax rate} =\) \(\frac{\text{income tax expense}}{\text{pre-tax income}}\)

• The effective tax rate, which is calculated as the reported income tax expense amount on the income statement divided by the pre-tax income.

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### Effective Tax Rate

$\text{effective tax rate} =$
$\frac{\text{income tax expense}}{\text{pre-tax income}}$

- The effective tax rate, which is calculated as the reported income tax 
  expense amount on the income statement divided by the pre-tax income.

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Cash Tax Rate

\(\text{cash tax rate} =\) \(\frac{\text{tax paid in cash that period (cash tax)}}{\text{pre-tax income}}\)

• The cash tax rate, which is the tax paid in cash that period (cash tax) divided by pre-tax income.

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### Cash Tax Rate

$\text{cash tax rate} =$
$\frac{\text{tax paid in cash that period (cash tax)}}{\text{pre-tax income}}$

- The cash tax rate, which is the tax paid in cash that period (cash tax) 
  divided by pre-tax income.

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