dotamasta

Now that I think about it, answer is indeed B.

Option A

Expensing the cost will have no effect on the liability (debt) side of the balance sheet but will decrease asset (reduction of cash) and equity. And so Debt-to-asset and debt-to-equity will both increase. Decreased denominator. For capilized firm, it'll be the opposite effect. So this statement is accurate.

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Option B

Expensing the cost will show a higher profitability early in the asset's life is wrong, because expensing the cost will have a higher impact on net income as opposed to capitalizing it. So this statement is the least accurate, although the first part of the statement is accurate in that both firms will have the same TOTAL cash flows over the life of the asset.

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Option C

Expensing the cost will have a lower profitability ratio because of reduced net income...etc. So this option is accurate.