CapEx

Definition

CapEx, short for Capital Expenditure, refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment.

Purpose

Capital expenditures are made to enhance the long-term value of an organization by investing in its physical infrastructure, enabling growth, improving efficiency, and maintaining operational capacity.

Examples of Use

1. Purchasing Equipment: Buying new machinery for a manufacturing plant.
2. Building Construction: Funding the construction of new office buildings or facilities.
3. Upgrading Technology: Investing in new computer systems and software for business operations.

Related Terms

• OpEx (Operating Expenditure): Funds used for the day-to-day functioning of a business.
• Depreciation: The process of allocating the cost of a tangible asset over its useful life.
• ROI (Return on Investment): A measure used to evaluate the efficiency of an investment.

Notes

CapEx decisions are crucial for the long-term strategic planning of a company. They often require significant financial commitment and careful consideration of potential returns on investment.