Capital Expenditure - CAPEX

AAA

DEFINITION of 'Capital Expenditure - CAPEX'

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.

INVESTOPEDIA EXPLAINS 'Capital Expenditure - CAPEX'

The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities.

In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expenditure, it needs to be capitalized; this requires the company to spread the cost of the expenditure over the useful life of the asset. If, however, the expense is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense.

VIDEO

RELATED TERMS
  1. Cash Flow To Capital Expenditures ...

    A ratio that measures a company's ability to acquire long term ...
  2. Research And Development (R&D) ...

    Any expenses associated with the research and development of ...
  3. Capital Asset

    A type of asset that is not easily sold in the regular course ...
  4. Capital Budgeting

    The process in which a business determines whether projects such ...
  5. Capital Goods

    1. Any tangible assets that an organization uses to produce goods ...
  6. Capital Rationing

    The act of placing restrictions on the amount of new investments ...
Related Articles
  1. Discounted Cash Flow Analysis
    Fundamental Analysis

    Discounted Cash Flow Analysis

  2. Capital Budgeting
    Investing Basics

    Capital Budgeting

  3. Depreciation: Straight-Line Vs. Double-Declining ...
    Forex Education

    Depreciation: Straight-Line Vs. Double-Declining ...

  4. Analyze Cash Flow The Easy Way
    Fundamental Analysis

    Analyze Cash Flow The Easy Way

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center