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Increases in "book value" are reflected in earnings. Example: you make a profit of $100. You use those $100 to buy the Brooklyn Bridge. Your profit is still $1
by matt4077 9y ago
Increases in "book value" are reflected in earnings.
Example: you make a profit of $100. You use those $100 to buy the Brooklyn Bridge. Your profit is still $100. It's only your cash flow that's now at $0.
- hidenotslide 9y agoThe difference is stocks vs. flows. $100 capex only shows up in year one, but the balance sheet goes up permanently (depreciating of course). When the parent mentions "level of infrastructure" it refers to the balance sheet account, which is why I mentioned P/B.