Effect of Capex on Financial Statements
If Capex increases by 100, how does it effect the 3 financial statements? A bit unclear about this, specifically as it relates to impact on income statement?
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No effect in the IS
As depreciation expense is linked to CAPEX, doesn't the I/S get reduced by the depreciation amount?
Capex and Depr are indeed interlinked, but as of year n+1. I do believe this scenario refers to year 0
Okay got it. So in Year 1 what would the Financial Statements look like if depreciation expense was 5. Would it be:
I/S: goes down by 5
CFS: goes down by 5
B/S: Assets go down by 5 (as cash goes down by 5) and PPE goes down by 5, thus balancing out.
Depreciation is a non cash expense and is added back on the cash flow statement
I would say the following:
Does this makes sense to you?
Got it thanks. Does NI specifically flow into the Retained Earnings of Shareholders Equity?
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