The effective tax rate is the income tax expenses divided by pretax incomes. For individuals, this tax rate is the average rate at which their earned income is taxed. But whereas for a company, it is the average rate at which its pre-tax profits are taxed. This page shows the effective tax rate formula to calculate tax rate of an organization. Just divide the income tax expenses and pretax income and multiply the resultant value with 100 to get the tax rate.
The above effective tax rate formula is a useful one for you to determine the profitability ratio. It is one among the important formulas which is commonly used by the financial experts to analyze the profitability.