Techniques That Can Be Used to Minimize the Current Period

question 25

Multiple Choice

Techniques that can be used to minimize the current period tax liability include:

• A) Recognizing the interaction between the regular income tax liability and the alternative minimum tax liability.
• B) Utilizing special allocations.
• C) Having favorable treatment of certain fringe benefits.
• D) Minimizing double taxation.
• E) All of these can be used for effective tax planning.

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Definitions:

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the profits made will be greater than the interest payable.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

ROCE

Return on Capital Employed; an economic metric that evaluates how effectively a firm uses its capital to generate profits.

Variable Costs

Expenses that shift in direct proportion to the amount of production or sales, like labor and materials.