Impact on financial statements from acquisition financed with 50% debt and 50% equity

I have been asked in an interview "What would be the impact on financial statements from acquisition  financed with  50% debt and 50% equity"?

Thanks for your help in advance!

4 Comments
 
Most Helpful

IS:

Could factor in depreciation but mainly depends on when the asset is bought.

Interest rate because you financed it with debt.

As a result of the two, the taxes and net income change as well.

CFS:

Net income as a top line changes.

You'll get the benefit of less taxes due to the tax shield on both depreciation and interest expense.

Hence cfo would be a bit more.

Cff increases due to issuing debt and equity while Cfi goes down by probably the same amount as you invest that in acquiring something.

BS:

Cash increases a bit due to more cfo. As a result retained earnings go up too.

Assets go up by whatever you've purchased.

Shareholders equity and debt (liability) goes up accordingly as well.

Could possibly have a change in goodwill as well if you are paying a premium for whatever you are acquiring

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