If the tax rate is t, it is possible to calculate planned operating income by
A)dividing net operating income by t.
B)dividing net operating income by 1 - t.
C)multiplying net operating income by t.
D)multiplying net operating income by 1 - t.
E)dividing net operating income by t - 1.

Question

Quizplus · Accepted Answer

Planned operating income can be calculated by dividing net operating income by (1 - t), as the tax rate reduces the amount of net income that is available for operating activities. Therefore, planned operating income must be calculated by dividing net operating income by (1 - t) to account for the reduction in net income due to taxes.

If the Tax Rate Is T, It Is Possible to Calculate