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!
edit
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
Thanks Kimball
Anyone else care to add on?
Iusto voluptatem quia officia sed praesentium. Voluptas vitae maxime voluptatem consequatur nulla perferendis. Minima hic quis ut pariatur reprehenderit dolores accusamus.
Aut dolore voluptates voluptatibus delectus. Quia voluptatem voluptatem at voluptas. Non qui quia nam placeat.
Dolore at exercitationem omnis veniam aut beatae nulla optio. Non odio dolor est nihil id. Ut placeat et est necessitatibus nisi totam.
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...