Q.1. You are an investment analyst domiciled in Country Z doing a cross-country comparison of the financial performance of two manufacturing companies in the pharmaceuticals industry. Both companies, X and Y (located in Countries X and Y), have similar expected sales of $600 million. Country X has a corporate income tax. Country Y has no income tax but relies on indirect taxes. Selected data for companies X and Y are as follows: Соmpaпy X Соmрany Y Pretax income Return on sales $120 million $72 million 12.0% 12.0% Required: Determine which company promises to have the better financial performance? What tax considerations might affect your conclusions?

Q.1. You are an investment analyst domiciled in Country Z doing a cross-country comparison of the financial performance of two manufacturing companies in the pharmaceuticals industry. Both companies, X and Y (located in Countries X and Y), have similar expected sales of $600 million. Country X has a corporate income tax. Country Y has no income tax but relies on indirect taxes. Selected data for companies X and Y are as follows: Соmpaпy X Соmрany Y Pretax income Return on sales $120 million $72 million 12.0% 12.0% Required: Determine which company promises to have the better financial performance? What tax considerations might affect your conclusions?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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