What is “CapEx” meaning?

CapEx, short for Capital Expenditure, refers to the funds used by a business to acquire, upgrade, or maintain physical assets. This can include investments in property, buildings, machinery, equipment, and technology. These expenditures are typically long-term and are essential for the growth or upkeep of a company’s infrastructure.

Example

“The company allocated $5 million in CapEx for upgrading its manufacturing plant with new machinery to improve production efficiency.”

How is “CapEx” used in business?

CapEx is used by businesses to expand, enhance, or maintain their physical assets. It is critical in industries such as manufacturing, technology, and real estate. Unlike operating expenses (OpEx), which cover daily costs, CapEx focuses on long-term investments aimed at increasing a company’s value and operational capacity.

Pro Tip

Be mindful of how CapEx is accounted for on financial statements. It is capitalized on the balance sheet and depreciated over time, impacting both cash flow and profits.

Related Terms

OpEx (Operating Expense), Depreciation, Investment, Asset Management