Capitalization of expenditures as a cash flow, can’t really understand the logic behind the solution

Also, keep in mind that when you capitalize CF, you take it off of the income statement, which increase net income. Since it net income is part of the calculation regarding CF from operations, higher net income equals higher CF from operations, all else being equal.

If your investment flows are already negative then capitalizing will indeed increase flow, making it more negative, or even more outflow. Same with operating, I think keeping inflow and outflow instead of just saying “cashflow” and assuming it is positive to the company.

Hey @tingwuwang, let me try:

Expenditure capitalization always results in cash OUTflow, it is just a matter of where this is classified under cash flow statements (operating vs. investing).

So if I capiltalize an expenditure, that means instead of it registered as a cash outflow in operating activities, it is being reclassified under cash outflow in investing activities. And therefore the total cashflow of operating activities will increase (to remove the cashoutflow being reclassified to investing activities), and total cashflow of investing activities will decrease (as it now has to deduct cash flow due to this expenditure).

Does this make sense?

yup @tingwuwang, that’s how I interpreted the question. Glad it’s useful.

Keep calm and carry on, you guys are all doing great!