Hotspot Question For each of the following statements, select Yes if the statement is true. Otherwise, select No. NOTE: Each correct selection is worth one paint. Answer:

Question

Exhibit

Answer Area

• Pay-As-You-Go (PAYG) is a consumption-based model.Yes
• Payments to cloud service providers are considered capital expenditures (CapEx).No
• The services provided through a consumption-based model are considered operational expenditures (OpEx).Yes

Explanation

Cloud computing utilizes a consumption-based (Pay-As-You-Go) model which falls under Operational Expenditure (OpEx), as opposed to upfront Capital Expenditure (CapEx).

Approach. 1. Select 'Yes' for the first statement: Pay-As-You-Go (PAYG) is the definition of a consumption-based model where you pay only for what you use. 2. Select 'No' for the second statement: Payments to cloud providers are not CapEx; CapEx refers to upfront spending on physical infrastructure (like buying your own servers). 3. Select 'Yes' for the third statement: Because consumption-based models bill you as you use the services, these are classified as ongoing Operational Expenditures (OpEx).

Common mistakes.

• common_mistake. A common mistake is selecting 'Yes' for the second statement, which indicates a misunderstanding between CapEx (Capital Expenditure - buying physical assets upfront) and OpEx (Operational Expenditure - paying for services as you consume them, like a utility bill).

Concept tested. Cloud Financial Principles: CapEx vs. OpEx and Consumption-based (PAYG) models

Reference. https://learn.microsoft.com/en-us/training/modules/describe-cloud-concepts/5-compare-capex-opex

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