Walk through a company's financial statements over two years if it bought $100 asset with 50% debt 50% cash
Hey all,
Novice currently running through some technicals and I am unsure about my process/feel like I may be missing some steps here. Would really appreciate some feedback! Thanks.
Assuming 10% depreciation, 10% interest, 50% tax rate, no principal paid off. I broke it down with immediate then from year 1 to year 2....
here's my thinking:
(initially/year 1)
IS:
pretax income: down 50
net income: down 25
CF:
NI down 25
CF investing down 50
CF financing up 50
change in cash: down 25
BS:
cash down 25
pp&e up 50
final assets up 25
debt up 50
retained earnings down 25
L&SE up 25
balance
from year 1 to year 2
IS:
depreciation 10
interest 5
pretax down by 15
net income down by 7.5
CF:
NI down by 7.5
add back depreciation +10
change in cash: up 2.5
BS:
cash up 2.5
PP&E down 10
assets down 7.5
RE down 7.5
L&SE down 7.5
balance
Y0 (date of purchase)
IS: No change CFS: Raise 50 of debt, pay out 50 immediately + 50 cash you pay out net cash is down 50 BS: Liabilities up 50, Cash down 50, asset up 100 so net assets up 50 balance
Y1
IS: Interest expense of $5 (50x10%) , depreciation expense of $10 (100x10%)
After tax net income down 7.5
CFS: Net income down 7.5, add back $10 of depreciation, cash up 2.5
BS: Cash up 2.5, net income/SE down 7.5, Asset down 10. Net assets down 7.5, L/SE also down 7.5
You'd repeat the process for Y1 for Y2
Laudantium impedit modi amet veritatis perspiciatis. Atque et eum eius aperiam nostrum laboriosam voluptatem aut. Cum nostrum omnis tempore amet illo voluptatem vero. Maiores excepturi esse officiis sint inventore optio quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...