Which of the following statements about the capitalization decision is most accurate? a) the choice between capitalization and expensing makes no operational difference b) firms that capitalize costs will show more variability in reported earnings c) firms the capitalize costs will have lowe assets and equity d) cash flow from operations is not affected by the capitalization or expensing decision
edit: oops a) the choice between capitalization and expensing makes no operational difference i don’t even know… f***… they all seem wrong
eliminate b, hmm now eliminate d now eliminate c
D Sorry, D is wrong because total cash flow at the end of the period is the same in both operating and capital lease. So the one remaining is B.
Answer is A
what do they mean by operational difference? effect on EBIT?
Got confused on this one…1 point lost
Expensing causes a great variability, not capitalizing. So does “operational difference” = total cash flow? I HATE “total cash flow”, they never actually say the 3 words so you never know if that is what they mean or not.
you got in amber