Hey there,
Have got my hands on a case study and preparing a financial model for a manufacturing plant. I have sample calculations (output) and just noticed that the principal repayment of the debt amount isn't included in the P&L, but only in CFS. I understand that only interest expense is tax deductible, but still repaying principal is a cash outflow, and should be included in P&L.
Secondly, any dynamic formula in excel where the code matches the date from the assumption sheet and takes the debt beginning balance for that year and divides it by the maturity period and spreads across the result. Currently I am hard coding the values and if I change repayment date, i have to do it manually.
Repaying debt doesn't generate profit or losses.
If you give me a dollar, and I pay it back - have you made any money (profit)? If the dollar was never mine to begin with, have I lost anything?
If, by your assumptions, repayment of debt should be in the P&L as an "L", then by extension, the assumption of debt should be a "P". Take on debt and watch that bottom line grow!
From an accounting standpoint, you are simply covering an obligation with an asset - so your cash is reduced (credited) by the amount of debt that you're extinguishing (debited).
^
Thread's done.
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