- This topic has 7 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
Please confirm if there is negative cash flow then no tax is paid on it right
If the net cash flow is negative then there is no tax payable, but there is a cash inflow of the tax saving.
Have you not watched my free lectures on investment appraisal with tax?
If net cash flow is negative, then company will receive tax? Please confirm im a bit confused
No, they do not receive tax but they save tax, and a saving is effectively a cash inflow for the project.
As I explain in my lectures, we always assume that the company is already making profits and is already paying tax. If a new project has a positive net cash flow then there will be more tax payable – so a cash outflow. If a new project has a negative cash flow, then the company as a whole will pay less tax, so a tax saving due to the project.
- The topic ‘tax’ is closed to new replies.