Capitalization of R&D expenses: R&D expenses are included in the development expenses of the balance sheet. Capitalization of development expenses can reduce the expenses of enterprises and thus overstate the net profit, but at the cost of reducing the cash of enterprises. When the development expenditure is capitalized, the corresponding cash flow is included in the cash flow statement as "cash paid for the construction of fixed assets, intangible assets and other long-term assets", which belongs to the cash outflow from investment activities. When the development expenditure is completely expensed, the corresponding cash outflow is recognized in the operating cash flow. Therefore, capitalization of development expenditure will exaggerate operating cash flow.

Tips: The above information is for reference only.

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