How to Get the Principal Payment From Financial Statements

A loan's principal is the balance owed on the loan. When a company makes a principal payment to pay down the balance of a loan, it reports the amount of the payment on its cash flow statement. This is separate from the interest it may pay on a loan. The principal payment reduces the cash a company holds, but does not affect its profit, as the payment is not part of its operating expenses. A company can benefit from making principal payments on its loans because the payment reduces its debt, which reduces its interest expense.

Step 1

Find a company's cash flow statement in either its 10-Q quarterly reports or in its 10-K annual reports. You can obtain these reports from the investor relations section of a company's website or from the U.S. Securities and Exchange Commission's EDGAR online database.

Step 2

Find the "Cash Flows from Financing Activities" section, which is the last section of the cash flow statement.

Step 3

Look for the line containing the description "Repayment on Debt," or "Payment of Loan Principal."

Step 4

Identify the dollar amount, listed to the right of the description. A company encloses this amount in parentheses to show that the amount reduces its cash. For example, if a company's cash flow statement shows "Payment of Loan Principal ($5,000)," the company paid $5,000 toward the principal balance of its debt, which means it owes $5,000 less than it did before.

Tip

Monitor a company’s principal payments over different accounting periods. A company that pays down its loan balances has less debt, which reduces its risk to stockholders.

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