The annual report includes an income statement, a balance sheet, a statement of cash flows, and accompanying notes. EBIT is the earnings before interest and taxes. The payout ratio is the proportion of earnings that the firm paid to shareholders as cash dividends.
Notes disclose the significant accounting policies used to prepare the financial statements.
There tends to be less disparity between market and book values for liabilities. The income statement has noncash items for which the cash flow from an expense occurs at a time outside the reporting period. A firm's operating income can be a good estimate of the true economic operating income provided the following hold. The tax rate applied to the last dollar of income is called the marginal tax rate. The average tax rate is the total taxes paid divided by taxable income.