24. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted.

Compared to firms that expense costs, firms that capitalize those same costs are most likely to have debt-to-assets ratios and cash flow from operations, respectively, that are:

Select exactly 1 answers from the following: A. B. C. D.
答案和详解如下！
Feedback: Correct answer: B

The Analysis and Use of Financial Statements, 3rd edition, Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried (Wiley, 2003), pp. 227-233

2006 Modular Level I, Vol. II, pp. 791-797

Study Session 9-40-a

compute and describe the effects of capitalizing versus expensing on net income, shareholders?equity, cash flow from operations, and financial ratios and explain the effects on financial statements and the interest coverage ratio (times interest earned) of capitalizing interest costs, and explain the circumstances in which intangible assets, including software development costs and research and development costs, are capitalized

Capitalization increases the asset base; costs that are expensed reduce cash flow from operations but capitalized costs reduce cash flow from investing.

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