what is the formula for tax burden ? NI/EBT ? Thanks.
hw0799 Wrote: ------------------------------------------------------- > what is the formula for tax burden ? NI/EBT ? > Thanks. Yes. Net Profit/Pre-tax profit
The tax burden combined with interest burden make up the financial leverage components in Extended DuPont analysis
is it the higher the better? Thanks. NTP Wrote: ------------------------------------------------------- > The tax burden combined with interest burden make > up the financial leverage components in Extended > DuPont analysis
hw0799 Wrote: ------------------------------------------------------- > is it the higher the better? Thanks. Are you talking about tax burden or financial leverage? If tax burden is higher, it means you are paying less taxes, which is good for the company. You have higher cash.
+1. Depends on the question. a higher tax burden and interest burden contributes to a higher ROE. However, if the question is on solvency, you will want a lower interest burden or financial leverage.
higher tax burden = lower effective tax rate, contributes to higher ROE. hope this helps
if talking about solvency, will interest burden calculate the same famula? I remember there is a interest coverage test for solvency, do they also use interest burden? Thanks Oal29 Wrote: ------------------------------------------------------- > +1. Depends on the question. a higher tax burden > and interest burden contributes to a higher ROE. > > However, if the question is on solvency, you will > want a lower interest burden or financial > leverage.
Solvency and coverage are two different types of ratios. Solvency rations is CA/CL Coverage Ration is EBIT/Interest exp