medium · Investment Banking
A company has 100 in cash and no other assets. It has 50 in debt and 50 in equity.
If the company uses 20 of its cash to pay off 20 of its debt, how do the Three Statements change?
- Total Assets and Total Liabilities both decrease by 20; no impact on the Income Statement.
- Equity increases by 20 because the company now carries meaningfully less outstanding debt overall.
- Net Income increases by 20 because the outstanding debt was removed from the books.
- Cash Flow from Operations decreases by 20 due to the repayment of loan principal.
Sign up free to see the explanation and track your rank →
More Investment Banking practice
- What is the Multiple on Invested Capital (MOIC)?
- What is the control premium?
- Which valuation methodology would likely produce the 'floor' valuation for a mature indust
- Which of the following changes, held in isolation, would most likely achieve this?
- What is the Multiple on Invested Capital (MOIC)?
- If a company has an Unlevered Free Cash Flow (UFCF) of $500 million in Year 5, a WACC of 1
- What is the 3-year Compound Annual Growth Rate (CAGR)?
- If a company's Net Debt is negative, what is the relationship between its Equity Value and