CFA Practice Question

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CFA Practice Question

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.

A. be more profitable
B. be more liquid
C. have a higher revenue
Correct Answer: A

While it may appear more profitable, the company might have lower confidence in the quality of the reported numbers.

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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