In 2016, the Allen corporation had sales of $67 million, total assets of $42 million, and total liabilities of $19 million. The interest rate on the company’s debt is 6.3 percent, and it’s tax rate is 35 percent. The operating profit margin is 14 percent A. Compute the firm’s 2016 net operating income and net income The firm’s 2016 net operating income is Round to two decimal places B. Calculate the firms operating return on assets and return on equity

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.