Income Taxes
To get management to appropriately focus on taxes, the measure should reflect the income tax impact of ongoing operations and assets under management. Managements job is not to minimize taxes, but to maximize profits net of taxes.
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Income Taxes |
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State and federal governments stake a claim on company earnings. Since after-tax returns are what get paid to investors, management must manage the cash cost of this claim relative to the cash remaining for distribution.
To get management to appropriately focus on taxes, the measure should reflect the income tax impact of ongoing operations and assets under management. Managements job is not to minimize taxes, but to maximize profits net of taxes. |
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