When should a company review its ratio performance in relation to tax assessment?

A company should review its ratio performance in relation to tax assessment before filing a tax return to ensure accuracy and compliance with tax regulations. This review allows the business to assess its financial health and tax position, identify any discrepancies, and make necessary adjustments prior to submitting the tax return. It is crucial for companies to understand how their financial ratios, such as profitability, liquidity, and debt management, align with their estimated tax liabilities. This proactive approach helps in mitigating the risk of errors that could lead to audits or penalties and ensures that the file reflects the most accurate and favorable tax position for the company.

Reviewing ratio performance only when profits increase, after filing a tax return, or during a tax audit may not provide the same level of preparedness or accuracy, as these scenarios occur after critical decisions regarding tax liabilities have already been made or evaluated.