Capital Expenditure - CAPEX

Filed Under » ,
Dictionary Says

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 Says

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 Definition

Related Definitions

  •

    Capital Asset

    A type of asset that is not easily sold in the regular course of a business's operations for cash and is generally owned for its role in contributing to the business's ability to ...
    Read More »

  • Capital Budgeting

    The process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's ...
    Read More »

  • Capital Goods

    1. Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production ...
    Read More »

    • Useful Life

      The number of years, as set by the IRS, that depreciable business equipment or property is expected to be in use.
      Read More »

    • Capital Reserve

      A type of account on a municipality's or company's balance sheet that is reserved for long-term capital investment projects or any other large and anticipated expense(s) that will be ...
      Read More »

    • Capital Goods

      1. Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production ...
      Read More »

    • Capital Rationing

      The act of placing restrictions on the amount of new investments or projects undertaken by a company. This is accomplished by imposing a higher cost of capital for investment ...
      Read More »

    • Research And Development (R&D) Expenses

      Any expenses associated with the research and development of a company's goods or services. R&D expenses are a type of operating expense that can be deducted as such on the business tax ...
      Read More »

    • Build-Operate-Transfer Contract

      A type of arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers ownership of the project to the government. In many instances, ...
      Read More »

    • Price to Free Cash Flow

      A valuation metric that compares a company's market price to its level of annual free cash flow. This is similar to the valuation measure of price-to-cash flow but uses the stricter ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions