Resolved: Computing average daily expenses
Why taxes are not included in the cash expenses for computing average daily expenditure?
1 answers ( 0 marked as helpful)
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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