The correct answer is: C. Capital expenditure affects the profitability of a concern indirectly, but revenue expenditure affects directly.
Capital expenditure is the money spent on acquiring or improving long-term assets, such as buildings, equipment, and land. Revenue expenditure is the money spent on day-to-day operations, such as salaries, rent, and utilities.
Capital expenditure can affect profitability in a number of ways. For example, if a company invests in new equipment, it may be able to produce more goods or services, which could lead to increased sales and profits. However, capital expenditure can also lead to increased costs, such as depreciation and interest expense.
Revenue expenditure, on the other hand, has a more direct impact on profitability. For example, if a company spends more on salaries, its costs will increase, which will reduce its profits. However, revenue expenditure can also lead to increased sales and profits, such as if a company spends more on advertising to generate more sales.
In conclusion, capital expenditure can affect profitability both directly and indirectly, while revenue expenditure has a more direct impact on profitability.
Here is a more detailed explanation of each option:
- Option A: Capital expenditure does not affect the profitability of a concern, but revenue expenditure does. This is not true. Capital expenditure can affect profitability in a number of ways, as discussed above.
- Option B: Capital expenditure affects the profitability of a concern directly, but revenue expenditure does not. This is also not true. Revenue expenditure has a more direct impact on profitability than capital expenditure, but capital expenditure can also affect profitability, as discussed above.
- Option C: Capital expenditure affects the profitability of a concern indirectly, but revenue expenditure affects directly. This is the correct answer. Capital expenditure can affect profitability in a number of ways, but its impact is not as direct as revenue expenditure.
- Option D: Both capital expenditure and revenue expenditure affect the profitability of a concern directly. This is not entirely true. Capital expenditure has a more indirect impact on profitability than revenue expenditure.