If you increase capex (capital expenditure), what happens to depreciation and Net income?
You are talking about three things here Capital outlay, depreciation and net income Capital outlay in general requires that the gained asset to be capitalized except for certain repairs to bring an asset back to a useful life The asset useful life is divided into years then divided into the asset cost this is called depreciation which reduces the value each year and the resulting charge is called depreciation expense in the income statement. The offsetting is the reserve for depreciation account in the balance sheet For a capital acquisition you either paid cash out of the company till or it was financed.either way it is considered paid for and for it to be financed you gained a liability equal to the asset value. As the years roll on and each year another years is deducted for depreciation and entered into the income statement (depreciation expense) this lowers taxable income but not real income. As you can see depending on what you’re doing, what the capital expense is for it can get
