Hi guys! A while ago I was asked at the interview the following question:
"Guide me through 3 financial statement considering that your revenue is 0, and the depreciation is up by 100".
My answer was like a combination of usual "change in depreciation" answer and also nol and increase in deffered tax assets.
And then I was said that it is not a right one. That's how I failed.
Does someone know how to answer this question correctly?
Thanks in advance
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This is a pretty common question designed to see if you understand how the statements tie together. Go 1 by 1.
I/S:
Depreciation: up by 100 Net income: (assuming 35% tax): down by 65
C/F:
Cash from operations up 35
B/S:
PP&E down by 100 Cash up by 35 Retained earnings down by 65
Not sure if he is looking for the nol part, but this is the answer to most standard questions concerning the impact of depreciation.
That's exactly what I said. But there is smth with zero revenue. Like "if the revenue is zero , then it is not a going concern, therefore there should be no taxation". I'm not sure about this one.
How is this tricky? You should've been expecting one like this. Almost every IBD interview prep book stresses this.
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