A Company with an Income Tax Rate of 40% and an Objective

question 12

True/False

A company with an income tax rate of 40% and an objective of an after-tax target operating profit of $48,000 should generate a before-tax target operating profit of $120,000.
48,000/(1-.4)= $80,000.

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Definitions:

Indirect Method

A cash flow statement approach that adjusts net income for changes in non-cash accounts to calculate cash from operating activities.

Operating Activities

Activities directly related to the operation of the business, including cash flows from operations, investing, and financial activities.

Direct Method

A cash flow statement preparation approach that shows the specific cash inflows and outflows associated with the operating activities.

Cash Received

The actual cash gathered by a company from its various activities, including sales, financing, or investing, during a particular period.