A significant increase in capital expenditures reported in the investing section of the cash flow statement that coincides with a significant decrease in operating expenses as a percentage of sales may be an indication that the firm is improperly capitalizing costs that should be expensed.

Question

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An increase in capital expenditures while operating expenses decrease may suggest that the company is moving costs from operating expenses to capital expenditures, which could be a result of improperly capitalizing costs that should be recognized as expenses.

A Significant Increase in Capital Expenditures Reported in the Investing