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Why Is It Stated That the Safest Way of Evaluating

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Essay

Why is it stated that the safest way of evaluating the potential gains from a merger is to focus on changes in cash flow that will transpire as a result of the merger?


Definitions:

Pretax Accounting Income

The income an organization has earned before any taxes have been deducted, used to calculate taxable income after adjusting for any differences between accounting and tax regulations.

Enacted Tax Rate

The tax rate established by law that is applied to income or transactions.

Income Tax Expense

The total amount of income tax a company expects to pay to tax authorities relative to its taxable income.

Deferred Tax Asset

A financial item on a company's balance sheet representing taxes paid or carried forward that can be used to offset future tax liabilities.

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