Zero Coupon Bond

CFA Level I
#1

how does Issuing a zero coupon bond affects company’s financials??? Will increase CFF…correct??

#2

Increase CFO and decrease CFF

#3

shahravi123 Wrote: ------------------------------------------------------- > how does Issuing a zero coupon bond affects > company’s financials??? > > Will increase CFF…correct?? zeros understates CFF and overstates CFO

#4

For Discount bonds (including zero cpn) net CFO is overstated and net CFF is understated.

#5

It us because there are no interest payments made, thus CFO will be higher than it would be if it payed coupons. CFF will be lower because zero-coupon bonds are issued at a large discount and the payment at maturity will be all classified from CFF, which will cause it to be lower.

#6

daj224 Wrote: ------------------------------------------------------- > shahravi123 Wrote: > -------------------------------------------------- > ----- > > how does Issuing a zero coupon bond affects > > company’s financials??? > > > > Will increase CFF…correct?? > > > > zeros understates CFF and overstates CFO boom

#7

Issuing zero coupon bond will, Overstates CFO On issuance Proceeds are added to CFF - if we are adding…it will increase/overstate CFF too…

#8

thanks…overstate CFO UNderstates CFF !!

#9

shahravi123 Wrote: ------------------------------------------------------- > Issuing zero coupon bond will, > > Overstates CFO > On issuance Proceeds are added to CFF - if we are > adding…it will increase/overstate CFF too… If it is sold at a large discount, there will be less inflow to CFF than it would normally be otherwise.