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?
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