The analysis of the effect of tax on profitability indices in listed companies of Tehran Stock Exchange

Abstract

Profitability is considered as the most complicated feature for a company to be understood and evaluated. These ratios included in profitability are applied for evaluating business capabilities and making the wages in comparison with all cost during a specific period of time. In a more accurate way, the ratios indicate the profitability of a company, having calculated the total costs and tax on revenue, operational efficiency, company pricing policies, assets profitability and company’s shareholders. The approach applied in this research is descriptive-analytic. Using the data of 28 companies listed in Tehran Stock Exchange from 2004 to 2010 and using panel data approach, the tax effects over the paid profitability indices were studied in this paper. The results achieved from all estimation cases point out a negative significant effects on various profitability indices. It should be mentioned that in order to relate the taxes to the profitability indices, the costs and the debts of a corporation can be referred. Results of the study indicated that the debts ratio to asset and the type of the industry showed a negative effect on profitability and capital ratio to asset and the size of the company indicated positive significant effects on profitability index.