- This topic has 7 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- June 12, 2021 at 3:05 pm #625092
Please confirm if there is negative cash flow then no tax is paid on it right
June 12, 2021 at 3:57 pm #625102If 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?
June 12, 2021 at 4:23 pm #625106yes sir, but I do get confused sometimes
June 12, 2021 at 4:38 pm #625108that means when cash flow is negative , we will add tax?
June 13, 2021 at 7:18 am #625124If net cash flow is negative, then company will receive tax? Please confirm im a bit confused
June 13, 2021 at 9:06 am #625137No, 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.
June 13, 2021 at 9:21 am #625142Thank you so much
June 13, 2021 at 9:25 am #625145You are welcome 🙂
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