Mattel Inc.'s 2016 financial statements show operating profit before interest and tax of $519,233 thousand, net income of $318,022 thousand, provision for income taxes of $91,720 thousand and net nonoperating expense before tax of $109,491 thousand. Assume Mattel's statutory tax rate for 2016 is 37%.
Mattel's 2016 effective tax rate is:
A) 22.4%
B) 37.0%
C) 19.4%
D) 17.7%
E) None of the above

Question

Quizplus · Accepted Answer

The effective tax rate is calculated as the provision for income taxes divided by the income before tax. Income before tax is net income plus provision for income taxes, which is $318,022 + $91,720 = $409,742 thousand. The effective tax rate is $91,720 / $409,742 = 22.4%.