I’ve been writing for a couple of years now about an impending cataclysm about to hit company earnings, cash flows and credit. As we know, many firms were bailed out from having to make stepped-up contributions thanks to the large rally in the financial markets in 2009.
Despite this past week’s 3.4% earnings-related stock rally, as of this writing, the S&P 500 Index is just near break-even for the year.
I bring up this unfortunate news as we are about to close out another month for the calendar year 2010, now 58% done. By August end, the year will be two-thirds over, and so will vacation time.
“Last year we made $112 million before taxes….except we don’t pay no taxes”
-from “Some Like it Hot”
Publicly held firms try their best to replicate the Mafia’s tax rate, but normally only get there if losses are involved. As such, taxes must be carefully scrutinized for its effect on cash flow and leverge.
CT Capital’s risk (equity cost of capital) model incorporates many tax variables, including both the effective (that reported to shareholders) rate and that based on the actual taxes paid.
