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Basic Question 10 of 12
If a company is the only one in the industry to capitalize certain costs, while others treat them as expenses, the company is expected to ______, other things being equal.
B. be more liquid
C. have a higher revenue
A. be more profitable
B. be more liquid
C. have a higher revenue
User Contributed Comments 5
| User | Comment |
|---|---|
| Wassimes95 | explain please? |
| SRI2010 | Profitability increases by the amount that is capitalized. Had it been expensed, the operating income would have decreased. |
| sarasyed5 | what is the difference between being more profitable n having a higher revenue? |
| khalifa92 | revenue is sales before deducting anything profitable means after deduction everything we still have a higher NI |
| VazquezCol | Profitability is measured by Net Profit Margin, ROE or ROA (or others). A is correct only during early years, after that the answer would incorrect. The only reason to make A the correct answer is because B and C are false all the time, making A the only option that contains some truth in it |
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Learning Outcome Statements
describe general principles of expense recognition, specific expense recognition applications, implications of expense recognition choices for financial analysis and contrast costs that are capitalized versus those that are expensed in the period in which they are incurred
CFA® 2024 Level I Curriculum, Volume 2, Module 2.