标题: Capitalizing vs Expenditure [打印本页] 作者: slackeranalyst 时间: 2011-7-13 17:03 标题: Capitalizing vs Expenditure
In Schwesernotes stated that: "Capitalizing an expenditure will initially results in higher return on assets (ROA) and higher return on equity (ROE)". Any one can prove it for me, please?
I think Capitalizing make higher return but increase asset or equity also, therefore, I am not sure such ratios up or down relatively expensing!!! May it give more condition like ROA is more or less than 1 to be more clear???
Thank for any help!作者: eagles_dare13 时间: 2011-7-13 17:03
It is because of this inequality:
Numerator / Denominator <= (Numerator+k) / (Denominator+k)
For any non-negative k and numerator <= Denominator.
Although, I think there should be a tax effect too. $100 not expens'd means $30 of tax. Then the numerator and denominator are not increasing by the same amount.作者: scr879 时间: 2011-7-13 17:03
giakhanh39 Wrote:
-------------------------------------------------------
> In Schwesernotes stated that: "Capitalizing an
> expenditure will initially results in higher
> return on assets (ROA) and higher return on equity
> (ROE)". Any one can prove it for me, please?
>
> I think Capitalizing make higher return but
> increase asset or equity also, therefore, I am not
> sure such ratios up or down relatively
> expensing!!! May it give more condition like ROA
> is more or less than 1 to be more clear???
>
> Thank for any help!
Think of it this way: NI is a lot higher when capitalizing vs expensing in the first year, therefore, ROA and ROE is higher, too.作者: cyber21 时间: 2011-7-13 17:03
davey is correct. Just think expensing= I take the hit now, so NI is lower, but if I'm capitalizing then I'm not taking the hit to expense, so NI is higher.作者: rgonzalez 时间: 2011-7-13 17:03
