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Effective Tax Rate |
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Definition of Effective Tax RateEffective Tax RateThe total tax provision divided by pretax book income from continuing
Related Terms:Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. Accelerated depreciationAny depreciation method that produces larger deductions for depreciation in the accelerated depreciation(1) The estimated useful life of the fixed asset being depreciated is Accelerated depreciationAny of several methods that recognize an increased amount Accounting rate of return (ARR)A method of investment appraisal that measures accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Adjustable rate preferred stock (ARPS)Publicly traded issues that may be collateralized by mortgages and MBSs. After-tax profit marginThe ratio of net income to net sales. After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. All equity rateThe discount rate that reflects only the business risks of a project and abstracts from the Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Annual percentage rate (APR)The periodic rate times the number of periods in a year. For example, a 5% annual percentage rate (APR)Interest rate that is annualized using simple interest. Arithmetic average (mean) rate of returnArithmetic mean return. Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Auction rate preferred stock (ARPS)Floating rate preferred stock, the dividend on which is adjusted every Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Average tax ratetaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Barbell strategyA strategy in which the maturities of the securities included in the portfolio are concentrated Base interest rateRelated: Benchmark interest rate. Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Before-tax profit marginThe ratio of net income before taxes to net sales. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial book rate of returnAccounting income divided by book value. Break-even payment rateThe prepayment rate of a MBS coupon that will produce the same CFY as that of Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering Broker loan rateRelated: Call money rate. Bullet strategyA strategy in which a portfolio is constructed so that the maturities of its securities are highly Buy-and-hold strategyA passive investment strategy with no active buying and selling of stocks from the Call money rateAlso called the broker loan rate , the interest rate that banks charge brokers to finance Capitalization RateA discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate. cash burn rateA relatively recent term that refers to how fast a business Cash flow after interest and taxesNet income plus depreciation. Combination strategyA strategy in which a put and with the same strike price and expiration are either both compensation strategya foundation for the compensation plan that addresses the role compensation should play in the organization computer integrated manufacturing (CIM)the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system confrontation strategyan organizational strategy in which company management decides to confront, rather than avoid, competition; an organizational strategy in which company management still attempts to differentiate company ConglomerateA firm engaged in two or more unrelated businesses. Conglomerate mergerA merger involving two or more firms that are in unrelated businesses. Contribution RateThe percentage tax charged by a state to an employer to Corporate acquisitionThe acquisition of one firm by anther firm. Corporate bondsDebt obligations issued by corporations. Corporate charterA legal document creating a corporation. Corporate financeOne of the three areas of the discipline of finance. It deals with the operation of the firm Corporate financial managementThe application of financial principals within a corporation to create and Corporate financial planningFinancial planning conducted by a firm that encompasses preparation of both Corporate processing floatThe time that elapses between receipt of payment from a customer and the Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Corporate taxable equivalentrate of return required on a par bond to produce the same after-tax yield to cost leadership strategya plan to achieve the position in a Coupon rateIn bonds, notes or other fixed income securities, the stated percentage rate of interest, usually Coupon RateThe rate of interest paid on a debt security. Generally stated on an Coupon rateThe nominal interest rate that the issuer promises to pay the coupon rateAnnual interest payment as a percentage of face value. Covered call writing strategyA strategy that involves writing a call option on securities that the investor Covered or hedge option strategiesStrategies that involve a position in an option as well as a position in the Crediting rateThe interest rate offered on an investment type insurance policy. Cross ratesThe exchange rate between two currencies expressed as the ratio of two foreign exchange rates Crossover rateThe return at which two alternative projects have the same net present value. Current Income Tax ExpenseThat portion of the total income tax provision that is based on Current rate methodUnder this currency translation method, all foreign currency balance-sheet and income Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. Dedication strategyRefers to multi-period cash flow matching. Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Deferred Tax LiabilityFuture tax obligation that results from the origination of a temporary Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. depreciation tax shieldReduction in taxes attributable to the depreciation allowance. differentiation strategya technique for avoiding competition by distinguishing a product or service from that of competitors through adding sufficient value (including quality and/or features) that customers are willing to pay discount ratethe rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Discount rateThe interest rate that the Federal Reserve charges a bank to borrow funds when a bank is Discount RateThe rate of interest used to calculate the present value of a stream discount ratethe rate of return used to discount future cash discount rateInterest rate used to compute present values of future cash flows. Discount RateThe interest rate at which the Fed is prepared to loan reserves to commercial banks. Discount RateA rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Dividend rateThe fixed or floating rate paid on preferred stock based on par value. Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Double-tax agreementAgreement between two countries that taxes paid abroad can be offset against earnings before interest and income tax (EBIT)A measure of profit that Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working EBDDT - Earnings before depreciation and deferred taxesThis measure is used principally by Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of effective annual interest rateInterest rate that is annualized using compound interest. Effective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Effective Annual YieldAnnualized rate of return on a security computed using compound Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the Effective convexityThe convexity of a bond calculated with cash flows that change with yields. Effective dateIn an interest rate swap, the date the swap begins accruing interest. Effective durationThe duration calculated using the approximate duration formula for a bond with an Effective Exchange RateThe weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country. Effective Interest RateThe rate of interest actually earned on an investment. It is
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