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You only get to deduct expenses, not investments. They could have bought a 70 million dollar piece of farm equipment with that money to reinvest, but they'd on
by rhino369 6y ago
You only get to deduct expenses, not investments. They could have bought a 70 million dollar piece of farm equipment with that money to reinvest, but they'd only get to deduct a small portion that year.
Regardless, you can't tell based on the data given whether the companies re-invested the money or distributed to shareholders. The difference between those companies could just be whether they booked a $50M sale on Dec. 31 or Jan. 1. Or whether they wrote off a bad asset on Dec. 31 or Jan. 1.
It's totally capricious.
- TheAdamAndChe 6y agoI guess there's something I don't understand here. You're telling me that if a company spends money to invest in itself or improve its infrastructure, that isn't considered an expense? That seems like it would disincentivize investment in company growth.
- ephextom 6y agoCapital expenditure (infrastructure) and operating expenses are treated differently. An investment in a new factory cannot be deducted as a business expense all at once; it must be depreciated over its useful life, so only a portion of it can be recorded as an operating expense against income for every year it is used. For software companies it's fuzzy; if you have a team of developers constantly working on enhancements to the company's platform, should the staff wages be counted as expenses or capital investment? It comes down to accountancy technicalities: https://www.wallstreetprep.com/knowledge/accounting-capitalized-software-costs/ https://www.wallstreetprep.com/knowledge/accounting-capitali...