📦Level Basic - IB Technical #5

Welcome to the 5th edition of Daily Technical Questions presented by TheFinanceGrind

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TODAY’S TECHNICAL INTERVIEW QUESTION

💬 What happens to the 3 financial statements if a company raises $100 in debt?

“If a company borrows $100, there’s no change to the Income Statement right away because the company hasn’t paid interest yet.

On the Cash Flow Statement, the $100 shows up under Cash from Financing. That means cash goes up by $100.

On the Balance Sheet, Cash (an asset) goes up by $100. At the same time, Debt (a liability) goes up by $100. So the balance sheet still balances.”

Common Mistakes for Newbies

Thinking Net Income changes → It doesn’t! No interest has been paid yet.

Forgetting it’s a financing activity → It’s not part of daily operations.

Not adding debt to liabilities → Always update both sides of the balance sheet!

TL;DR (Quick Recap for Newbies)

Income Statement:
No change

Cash Flow Statement:
Debt raised → Cash ↑ $100

Balance Sheet:
Cash ↑ $100 (Assets)
Debt ↑ $100 (Liabilities)
✅ Still Balanced

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