medium · Investment Banking
In an LBO, what is the effect of 'PIK' (Payment-in-Kind) interest on the 3 statements?
- It decreases Net Income on the IS and is added back as a non-cash expense on the CFS
- It increases cash flow because the company avoids paying cash interest.
- It steadily decreases the outstanding debt balance on the Balance Sheet as it accrues.
- It is treated purely as a dividend payment and therefore never appears on the Income Statement.
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