Folks,
I was seeting up a DCF for practise. I had to calculate the Tax rate from the historic perfomances... so I took taxable income/ net income and noted.. tax perecentage was 57% and went up to 82% and clearly im doing something wrong... please comment..
Maybe a simple Questions for allot of you..
| +184 | Analyst: Why is UBS IB doing worse than peers?, UBS CFO: No Comment | 34 | 3h |
| +171 | Leaked Interview Questions to Recruiting Services | 65 | 3h |
| +155 | UBS’s M&A BANKERS ARE DOING TERRIBLY. $200M EXTRA IS BEING CUT | 31 | 2d |
| +67 | How do YOU manage networking requests? | 22 | 2m |
| +61 | Are target prospects getting dumber? | 27 | 2d |
| +37 | Another $115bn Mega deal for these banks. Congrats! | 16 | 1h |
| +35 | MBB Pay Raises | 27 | 4h |
| +27 | Career Crossroads | 5 | 9h |
| +26 | US 2027 SA IB worried about background check | 8 | 14h |
| +23 | Investment Banking is Divine | 5 | 10h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
I'm not sure exactly what you did, but tax rate is an assumption. You should look in the footnotes of the company's financials and find their effective tax rate. Based on that, make an assumption and hold it constant into the future (should typically be between 25-35%).
i'm guessing you actually did either net income/taxable income or taxes/net income? you need to take taxes/taxable income.
Yeah, you did something wrong. The rate you find dividing taxes/NI is not the firm's actual tax rate (see footnotes) but it is a good approx. if you don't have other information. I suggest looking at the effective tax rate, unless you want to start playing with deferred tax assets and liabilities.
So my question here is, are you looking to get a tax rate? If so then why would you do Taxable Income/NI, and wouldn't that be more than 100% by logic, unless they get a tax credit and get cash back? If you want to get a rate I would say get current rate by looking at the statements and just do tax amount/taxable income, if that is not given then just (taxable income - NI)/NI. Maybe I'm misunderstanding what you are asking here, but there is no way taxes will be 50 - 80%.
sorry TI - NI/ TI
I agree with Alex_Kap about taking Taxes / Taxable income. I meant that before, I guess I wasn't very clear, my bad. I was just saying that the rate you see on the financials (income statement) isn't the real tax rate being put on the firm, just the result after taking into account deferred tax assets/liabilities due to differences in tax law and GAAP. BUT, like I said, just use the approx. mentioned (TE/TI) if no better information is available. The footnotes regarding taxes will have more info. as well.
Hope that is more clear. Sorry to get technical, but I majored in accounting, haha.
Delectus rerum odio voluptas atque esse. Velit quaerat quia vel suscipit.
Odit et corrupti suscipit. Numquam temporibus quia nihil ducimus suscipit dolorem. Inventore necessitatibus consequuntur aut reprehenderit sit.
Quisquam sit dolores est. Voluptatem quisquam maiores ab. Incidunt quis delectus in est. Ex non accusamus fugiat aspernatur aliquam recusandae. Et est quo quisquam et voluptatem reiciendis.
Et voluptatem dignissimos dolores. Voluptas est qui eos cumque. Rerum accusamus tenetur atque sit eaque labore. Explicabo suscipit et sit voluptatibus quasi. Distinctio praesentium eligendi voluptatem ea natus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...