Tax Rate Definition and Explanation

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Quick Definition

The percentage of taxable company income.

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Explanation of Tax Rate

Sometimes found in the Balance Sheet, the tax rate is simply the percentage of the income the company generates that is taxed. You can also indirectly calculate the tax rate, but the tax rate may also be located in the notes section of the Balance Sheet.

Importance of Tax Rate

The tax rate should be a somewhat consistent percentage of a company’s income. It is most valuable in calculating the Financial Leverage Index.