Deutsche Bank

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Interview Question

Investment Banking Analyst Interview

Lets say you're a company and you're paying your employees

  with all cash. Now you decide to pay them half with cash and half with stock compensation. How does this effect the three statements?
Answer

Interview Answer

1 Answer

0

Starting with the income statement...It remains unchanged. Your operational expenses have not changed.
Cash flow statement...The only thing that changes Cash flow from operations, where you add back the cash amount from paying with stock (since it is a non-cash expense). Overall cash flow is up by the amount you paid in stock. Balance sheet... Cash on assets side is up. On the liabilities + SE side, issuing equity to compensate increases SE, thus causing BS to balance.

j on Sep 27, 2014

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