Effect of capitalizing an asset on financing cash flow?? produces, financing, investment, understand, net

jawz

I understand that capitalizing vs. expensing an asset produces:

- higher CFO (because expensing outweighs the depreciation expense)
- higher net income (because of lower depreciation)
- lower CFI (because of higher investment cost in assets)
- higher assets
- higher equity
- higher ROE and ROA (because of higher net income)

But somewhere in my notes I wrote that capitalizing produces lower CFF as well ("because depreciation is a negative CFF"), which I now have trouble verifying. Is this a special case? In general, depreciation would be a negative CFO.

Any help appreciated.

RobertA

has no impact on CFF my friend in this country, only CFO and CFI

Micholien

- lower CFI (because of higher investment cost in assets)
- higher assets

I don't get this line.. could you expand?

Finalnub

As far as I understood, capitalizing, for example of development of an asset, will result in higher intangible assets. As ending intangible assets is higher than beginning intangible assets, this would count as a negative CFI.

Flok

Are you sure you're not thinking of a capitalize lease where the PV of the lease payments is a liability?

- Robert

suyash1989

positive. this has nothing to do with finance or operating leases.

Ionutzakis

It has no effect on CFF.

Anything capitalized will roll through CFI causing that to become lower over time. In the initial period, CFO will be higher than if you were to expense.