if accounts receivable goes down by 100, what happen to 3 statements?
what I think is as below...
IS: No change since it has been already recorded as revenue
CFS: Operating Activity: W.C decrease by 100 so Net change in Cash increase by 100
BS: Asset: Cash +100 Account receivable -100
is this right?
But, on youtube, one of the videos from Mergers & Inquisitions / Breaking Into Wall Street says that the net change in cash is 60 assuming tax of 40%.. And then take 60 to retained earning to balance out both side...of balance sheet...
But it makes me confuse since the video also mentions there is no change on IS ... but calculating tax.....??
Ha.. here is the link for the video just in case you wanna check it out..
Please help me.. I appreciate anykinds of thoughts and ideas...from you guys..
.
youre correct
The youtube vid would be correct if this was a change in an item on the income statement. The only time cash flows can be affected by tax rate is when they flow through the income statement. Since this is a change in a balance sheet account, there is no affect on the income statement at all. However if there was an increase in depreciation or something else on the income statement then this would either increase or decrease taxable income which would then be tax affected and would flow to CFS and BS. Hope this helps.
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