Question

What is the difference between effective tax rate, cash tax rate and structual cash rate?

Answer 1

The effective tax rate is calculated by dividing the company's total income tax expenses or benefits with the company's pre-tax net income or loss from continuing operations. It mainly serves as a benchmark for the companies in the same industry. The cash rate is the effective tax rate that is calculated by using taxes actually paid or refunded during the year. These taxes are reported in the statement of cash flows. The structural cash rate is the effective tax rate adjusted for one-time and non-recuring book-tax differences. It is referred as a substantial effective tax rate from operations.