Final answer:
True. All differences between book and taxable income, both permanent and temporary, affect a company's effective tax rate.
Step-by-step explanation:
True or False: All differences between book and taxable income, both permanent and temporary, affect a company's effective tax rate.
Answer: True
All differences between book and taxable income, whether they are permanent or temporary, affect a company's effective tax rate. Book income is the income reported on a company's financial statements, while taxable income is the income subject to tax. These differences can arise from various factors such as timing of revenue recognition, different depreciation methods, or tax-exempt income.
For example, if a company reports higher book income compared to taxable income, its effective tax rate will be lower. Conversely, if a company reports lower book income compared to taxable income, its effective tax rate will be higher. Therefore, all differences between book and taxable income have an impact on the company's effective tax rate.