What two factors are used to determine whether purchases are considered capital or operational expenses?

The determination of whether purchases are classified as capital or operational expenses is fundamentally linked to cost and life expectancy. Capital expenses typically involve significant expenditures that provide long-term benefits, such as the purchase of equipment, buildings, or other assets that will be utilized over multiple years. These expenses are often capitalized on the balance sheet rather than expensed immediately.

Life expectancy is another critical factor, as it indicates how long the asset can be used before it needs to be replaced. A longer life expectancy often supports the classification of an expense as capital, while purchases that are consumed or used up within a single fiscal year are usually classified as operational expenses.

Understanding this classification is essential for proper financial reporting and budgeting in healthcare construction management, where significant investments are made in infrastructure and equipment that impact the operational capacity and service delivery. The other options mentioned do not capture the fundamental criteria of financial reporting and expense classification as accurately as cost and life expectancy do.