Effective tax rate question
Statement 1: When analyzing a firm’s effective tax rate reconciliation disclosures, analysts watch out for companies that report high income tax expense on their financial statements compared to taxes payable because such companies are more likely to be using aggressive accounting method and have low quality earnings.
Statement 2: High effective tax rates may result when a firm has significant restructuring charges since restructuring charges do not generally have tax cash flow effects in the year they are recorded, but can have significant effects on future cash flows.
Statement 1 & Statement 2 ?
A. Correct & Correct
B. Incorrect & Correct
C. Incorrect & Incorrect
D. Correct & Incorrect.
Please give me your opinions on this question.
Many thanks. |