Businessman Investor

Touching base with the rational business psyche of stock market investors

Sunday, December 7, 2014

The Burden of Taxation and the Final Form of Corporate Profitability

After Tax as The Final Form of Corporate Profitability.
Return on Assets (ROA) is the final form of corporate profitability
which factors in all components: mark-up, working capital
turnover, capital spending, cost of borrowing, and tax burden.
As of this stage, we have arrived at After Interest Business Profitability (or as expressed mathematically, EBT/Operating Assets). This profitability metric, in conjunction with Non-core Business Profitability, would now be more appropriate to be subjected to the Burden of Taxation. To review:

EBT / Operating Assets = After Interest Business Profitability

Other Income / Non-core Business Investments = Non-core Business Profitability

Non-core Business Profitability captures profitability that is outside the company's core business operations. It has something to do with investment income earned (e.g. interest income, capital gains, dividends, etc.) from real estate, stock, bonds, or other money market investment instruments. We combine both After Interest Business Profitability and Non-core Business Profitability as follows:


The information presented here is for educational purposes only. Under no circumstances should it be construed as a recommendation to buy, sell, or hold any stocks. If you choose to use this information, you do so at your own risk.

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