Hey guys - quick accounting question that I wanted to double check with you. I need to model PIK preferred equity (8% PIK) and am thinking myself in circles around how this shows up on the three statements. I know that the PIK will be accruing to the Preferred Equity on the balance sheet each year, but am confusing myself on where it shows up on the IS and CF. Thanks in advance!!
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Interest expense on the IS
Source of cash (paid in-kind, no cash used) in financing activities on CF
Thanks for the quick response. Including it in interest expense will lower my taxable income - which doesn't seem right? I had seen some sources say that it gets subtracted underneath Net Income to arrive at "Net Income Available to Common". What's the rationale for including it in interest expense? It seems to me that it's more like a "cash-less" dividend paid to the preferred holders. Maybe I am overthinking it
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