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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: johnd who wrote (8852)	7/1/1998 6:40:00 PM
From: Reginald Middleton	Respond to of 74651

<Why does marketing spending be considered an investment. How is it different from Admin cost.> A simple litmus test for the investment categorization is to determine if (given all other things remained equal) an increase in said cash outflow would in all probability produce an increase in future revenues assuming it was already at a point that woudl sustain the operation of the company. If the answer is yes, chances are it should be capitalized instead of expensed. For instance, admin cost in the ERP division at MSFT, if increased by 50%, would most likely not produce an associated increase in revenue growth. Marketing in ERP, however, increased by 50% should produce a significantly different delta in revenue growth. The reason you capitalize is becase MSFT is an ongoing concern and the result should not be expected in the period of the cash outlay, but in future periods. Admin costs however, directly benefit the present only.