Question

What would be the excel formula to this: IF Year 1 operating income is less than 0, then year 1 income tax equals 0: otherwise year 1 income tax equals 33%* year 1 operating income.

Answer 1

We will demonstrate the IF function with the use of EXCEL as below.

When Operating Income is More than 0

Operating Income for Year 1 is reported in Cell B2

The relevant function as required is given against the f_x. in the above image.The function is =IF(B2<0,0,B2*33%) which indicates that IF the value of operating income reported in Cell B2 is less than 0, the value of tax in Cell B4 will be 0, otherwise the value of tax will be Operating Income*33%.

B4 for IF(B2<0,0,B2*33%) D ТА 1 в Year 1 10000 2 Operating Income 3 4 Tax 3300

Operating income for year 1 (in the above image) is assumed to be $10,000. Since, operating income is greater than 0, Year 1 tax will be $3,300 (10,000*33%).

______

When Operating Income is Less than 0

Below image shows the value of tax when operating income is less than 0.

B4 - fax =IF(B2<0,0,B2*33%) А C D 1 Year 1 2 Operating Income -10000 3 4 Tax 10

As can be seen from the above image that the IF function remains the same. However, the value of tax is 0 because the value of operating income for Year 1 (which is -$10,000) is less than 0.