Quick Summary
CapEx represents investments in long-term assets like property, plant, equipment, and technology.
Capital Expenditure (CapEx) refers to funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, equipment, or technology. These are investments that provide benefits over multiple years.
CapEx Formula
CapEx = PP&E (Ending) - PP&E (Beginning) + Depreciation
Or from Cash Flow Statement:
CapEx = Cash spent on purchase of fixed assets
Examples of CapEx
- Purchase of machinery and equipment
- Construction of buildings
- Technology infrastructure and software
- Vehicles for business use
- Furniture and fixtures
- Major renovations and upgrades
CapEx vs OpEx
| CapEx | OpEx |
|---|---|
| Long-term assets | Day-to-day operations |
| Capitalized on balance sheet | Expensed in P&L immediately |
| Depreciated over useful life | Deducted in same year |
CapEx in Financial Statements
- Shown in Cash Flow Statement under Investing Activities
- Increases fixed assets on Balance Sheet
- Depreciation reduces future profits
Key Points
- Investment in long-term assets
- Shown in Cash Flow Statement
- Capitalized and depreciated
- Essential for growth and maintenance
- Different from operating expenses