Definition:

Current Income Taxes Payable refers to the amount of income taxes a company owes to the government that is due within the current fiscal year. It is a liability on the company's balance sheet, representing taxes that have been incurred but not yet paid.

Formula:

Current Income Taxes Payable = Taxable Income * Tax Rate - Estimated Tax Payments

How to use the metric:

This metric is used by financial analysts and accountants to assess a company's short-term tax obligations. It helps in understanding the company's cash flow requirements and financial health by indicating the amount of taxes that need to be settled in the near term.

Limitations:

The metric may not provide a complete picture of a company's tax situation as it only accounts for current liabilities and does not consider deferred tax liabilities or assets. Additionally, it can be affected by changes in tax laws or accounting policies, which may not be immediately reflected in the payable amount.

Applies to:

This metric is applicable across all industries as every business entity is subject to income tax obligations. It is particularly relevant for industries with complex tax structures, such as multinational corporations, where understanding current tax liabilities is crucial for financial planning.

Doesn't apply to:

There are no specific industries where this metric does not apply, as all businesses have some form of tax obligation. However, non-profit organizations and entities with tax-exempt status may not use this metric in the same way, as their tax liabilities are different from for-profit entities.

Summary:

Current Income Taxes Payable is a key financial metric that indicates the amount of taxes a company owes in the short term. It is essential for managing cash flow and understanding a company's immediate tax obligations. While it is applicable to all industries, it should be used in conjunction with other financial metrics to get a comprehensive view of a company's tax position.