Capital expenditures (CapEx) are funds that a company uses to acquire, upgrade, or maintain long-term physical assets such as property, buildings, plants, equipment, or technology. These expenditures are investments intended to increase the scope or efficiency of a company's operations and provide benefits over multiple years. Examples include purchasing land, machinery, or vehicles, building new facilities, or making major repairs that extend an asset's useful life, such as replacing a roof
. CapEx differs from operating expenses (OpEx), which cover day-to-day costs like utilities, salaries, or routine maintenance. While OpEx is expensed immediately on the income statement, CapEx is capitalized, meaning the cost is recorded on the balance sheet and depreciated over the asset's useful life
. There are three main types of capital expenditures:
- Maintenance CapEx: investments to keep existing assets in good working condition.
- Growth CapEx: investments to expand operations or increase capacity.
- Strategic CapEx: investments aimed at achieving long-term strategic goals such as entering new markets or enhancing competitiveness
Capital expenditures are important indicators of a company's investment in its future and are typically reported in the cash flow statement under investing activities. The amount of CapEx varies by industry, with capital-intensive sectors like manufacturing, telecommunications, and utilities usually having higher CapEx levels
