Impact of Capitlization vs. expensing

Impact
· CFO - Higher (more +ve) Interest expense removed
· CFI- Lower (more -ve) Interest expense added
· Net cash position -No impact CFO and CFI balance out
· Assets -Higher Interest added to fixed assets
· Liabilities- No impact
· Equity -Higher Due to higher income
· Net income -Higher Lower expense now (higher later)
· Volatility of income- Lower Amortization smoothens expense
· Profitability (ROE, ROA)- Higher Higher NI outweighs high equity
· Leverage (Debt/Equity) -Lower Due to higher equity
· Coverage (EBIT/Interest expense) -Healthier Due to lower interest, higher CFO
· Liquidity (Current ratio)- No impact No change in CR or CL