Chapter 22 & 23 Flashcards
Effective Tax Rate Formula
Total Tax / EBT
After tax income is also known as what?
Net Income
Example:
A corporation is subject to a corporate income tax of 10%. Shareholders are taxed on dividends at a rate of 15%. Assume that the company pays out all its after-tax profits in dividends. The effective tax rate on the corporation’s profit is:
EBIT
Operating Profit
so 1k Rev - 800 operating expenses = 200 EBIT
ROE
NI / Equity
Partnership business structures
Shareholder Theory
VS
Stakeholder Theory
Stakeholder Theory of corp. governance requires both balancing multiple objective and measuring non-shareholder objectives.
Shareholders have residual interest in the corporation, in that they have claim to the net assets of the corp. after all liability’s have been settled.
Have voting rights for board of directors.
Have interest in ongoing profits and growth that will increase value of ownership shares.
Internal vs External Stakeholder groups
Internal are inside directors like senior executives.
External are independent directors who have no material relationship with the company.
one-tier board structure
In a one-tier board structure, both inside and independent directors serve on a single board. Major stock exchanges specify requirements for director independence, such as that most of the board should comprise independent directors
two-tier structure
In continental Europe, boards have a two-tier structure in which the independent directors serve on a supervisory board that oversees a management board comprising inside directors.
staggered board
In a staggered board, only a fraction of the board is elected each year.
This decreases the power of shareholders to enact a major overhaul of the board.
Firms with staggered boards justify them as providing continuity and allowing for a longer-term view of company strategy.
