How is it possible for a U.S.firm to have increasing earnings but a lower effective tax rate?
A)The firm has expenses that are not deductible for tax purposes.
B)Tax rates in foreign countries where the firm operates are higher.
C)Tax rates in foreign countries where the firm operates are lower.
D)It is not possible for a firm to have an effective tax rate different from the U.S.federal statutory tax rate.

Question

Quizplus · Accepted Answer

If a U.S. firm operates in foreign countries where the tax rates are lower than the U.S. federal statutory tax rate, it can have an effective tax rate lower than the statutory rate. This is because the firm can allocate more profits to these low tax rate countries, thereby lowering its overall tax burden. Additionally, the firm may utilize tax incentives and credits to further reduce its effective tax rate. Increasing earnings can also be achieved through various factors such as higher sales revenue, lower expenses, and non-operating income, among others.

How Is It Possible for a U