Target Net Income Is Computed by Multiplying Operating Income by One

question 106

True/False

Target net income is computed by multiplying operating income by one minus the entity's tax rate, or by multiplying operating income by the tax rate, and subtracting that amount from operating income.

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Definitions:

Dividends in Arrears

Unpaid dividends on cumulative preferred stock, which must be paid out before any dividends can be issued on common shares.

Cumulative Preferred Stockholders

Investors holding a type of preferred stock that accumulates dividends in arrears should the dividends not be declared in any given period.

Non-Participating

Refers to insurance policies or investment products that do not provide dividends or bonuses to policyholders or investors.

Yearly Dividend

The total dividend payment a company offers to its shareholders annually, which can be a sign of the company's profitability and financial health.