FC Investment

Y

Yankeegooner

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
In the midst of a meltdown moment and need someone to set my head straight.
p.144 SS12 schweser
“investments in fixed capital do not appear on the income statement, but they do represent cash leaving the firm.”
My day to day job doesn’t see a lot of financial statements, so please can someone explain to me where an investment in fixed capital goes if it isn’t on the income statement???
good luck everyone we can do it!
 
it would be on the balance sheet… Property, Plant and equipment or such item
and offset by the Accumulated Depreciation.
 
FC Investment does go to the income statement, but not immediately. It sits as an asset on the balance sheet, waiting to go to the income statement as the item is used.
So you buy a big new machine for $1m, and expect it to be useful for 10 years.
Of course you must pay the supplier now, and that is a cash outflow of $1m on the cash flow statement. But there may not be any immediatey expense on the income statement. A $1m asset appears on the balance sheet and this is like a pool of expenses waiting to go to the income statement over the life of the machine (with straight line depreciation: $100,000 each year).
 
You must log in or register to reply here.
Back
Top