Effective tax rate is reflected by the difference:

Question

Quizplus · Accepted Answer

Effective tax rate is the rate at which a company's pre-tax profits are reduced to post-tax profits. It is reflected by the difference between pre-tax cash flow and after-tax cash flow. Option B is incorrect because it refers to the tax rates of countries, not the effective tax rate of a company. Option C is incorrect because it presents a comparison between the subsidiary's tax rate and the MNC's tax rate, which is unrelated to effective tax rate. Option D is incorrect because it refers to a company's cost of capital and the discount rate it uses in computing NPV of projects, which is also unrelated to effective tax rate.

Effective Tax Rate Is Reflected by the Difference