2.3·6 min read

Sources & Uses

Every dollar used to buy the target and pay fees must be sourced from debt, new equity, or cash on hand. The two sides must balance.

By the end you can

✓Lay out a sources & uses table
✓Use cash on hand as the balancing plug

Uses (where cash goes)

› ()
› (advisory, legal)
› (to raise the debt)

Sources (where cash comes from)

›New debt raised
›New equity / buyer stock issued
›Cash on hand (the plug)

\text{Cash on Hand} = \text{Total Uses} - (\text{New Debt} + \text{New Equity})

Sources must equal uses; buyer cash fills whatever the new capital does not cover.

Fees split two ways

Transaction fees (banker and legal advice) are expensed and hit earnings once. Financing fees (the cost of raising the debt) are capitalized and amortized over the life of the loan, like a mini-D&A.

Check yourself

Total uses are $100M; the deal raises $30M debt and $60M equity. Cash on hand needed:

Practice in the simulator

Lock it in by building it yourself in a live, graded spreadsheet.

Build a sources & uses in the simulator →