Why taxes are not included in the cash expenses for computing average daily expenditure?

Hi Aman, the average daily expenditures comprise daily operating expenses that a company generates. The purpose of liquidity ratios is to evaluate a firm's liquidity position on an ongoing (daily, monthly) basis. Taxes are calculated at the year-end, based on accounting profits. Hence, they are not considered operating expenses and do not impact most liquidity ratios. I think this helps. Please let me know if you have any other concerns. Best, The 365 Team

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Aman Daultani

Last answered:

15 Mar 2023

Posted on:

12 Mar 2023

Resolved: Computing average daily expenses

in Financial Ratio Analysis / Calculating and Interpreting Liquidity Ratios

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Antoniya Baltova

Instructor

Posted on:

15 Mar 2023

Resolved: Computing average daily expenses

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