loans and profit

[meiru]

I found an error in your calculations... :-)

If you get loan (let's say 1 Mio.), then this doesn't affect the profit of your company... that's correct... the tax and what you pay back additionally to what you got do affect the profit... that's correct too... but the 1 Mio. that you are paying back should not be listet in the income statement on the negative side... that's a simple payback...

example

take 1'000'000
then pay back 1'200'000 (200'000 is the fees and other costs of this loan)

so now you don't have a negative balance of -1'200'000, but only of -200'000 ... or at least it should be ... :-)

[CX717]

because when you take 1M loan ,the income statement will show 1,000,000 on loan.
so it make sense it show -1,000,000 when you pay it back?

[meiru]

if it would, but it doesn't ... and even then it would be wrong... because, it's not making profit, if you get loan...

[swiftus27]

Guys, the income statement is compeltely jacked up. 

There are so many errors in that an what is considered GAAP and what is in the game. 

For instance, when you pre-pay for a lease (the months you pay ahead), those payments would actually be considered a corporate asset and would thus make your airline more valuable.  Those payments only become expenses once the period has started/past.    So, leasing a plane on Dec-31 wouldnt lower your tax bill in real life.

[swiftus27]

because when you take 1M loan ,the income statement will show 1,000,000 on loan.
so it make sense it show -1,000,000 when you pay it back?

A loan is considered a liability.  If the loan term is longer than one year, it is considered a long term liability. 

Loan payments come from the cash account (an asset acct).... the cash comes from revenue...
The bank'srepayment fee would actually be an expense and not a liability. 

Also, your corporate value doesn't change when you get a loan.

Value = 1 million .... then you borrow 2 million...
You have ( 2 million in cash + 1 million in value ) - 2 million in liabilities = 1 million in value

[CX717]

I am not very good at maths