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Income Tax
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Tax Rate Percentage =
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Earnings Before Income Taxes
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Explanation of Tax Rate Percentage:
The Tax Rate Percentage is an estimation of the tax rate imposed on
the company. A measurement of the Tax Rate Percentage over time can be
used to determine how well the company is able to contain its tax expenses.
Importance of Tax Rate Percentage:
A decreasing Tax Rate Percentage is generally a positive sign,
but you will need to investigate why this is occurring. Some possible
reasons could be the company has moved some of its operations to an area with a
different tax rate, or the company is able to record a different value for the
Income Tax than the income tax it actually had to pay. The tax rate imposed on
a company does not usually change much, and any change needs to be researched
further as this can be an indicator of large changes occurring within a
company.
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