Quick Question On PIK Interest Expense.
Given a question, how are 3 financial statements affected given a PIK expense of $10?
On the cash flow statement, is the PIK Non-Cash Expense considered an inflow for financing or operation activity?
My understanding of it is that PIKs add to the principal hence in its own way a form of issuing additional debt. However, it's also an expense that affects the net income, which would indicate it's apart of operations.
It’s reflected in CFO. It’s just an add-back of a non cash expense. The additional principal doesn’t change your cash balance, there’s nothing to reflect on the CFS for that.
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This got me in my first interview… had no idea what it was
That's rough for a first interview. HLRX? they're generally pretty early in the process.
Just to add, it is an expense on the income statement and subject to the 30% of EBIT limitation (as of 2023).
Sorry, if this doesn't sound right, I'm still in school. Is this implying that a net interest expenses cannot deduct more than 30% of ebitda from taxes?
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