Capital Expenditure (CapEx) is a term used in finance to describe funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CapEx is often used to undertake new projects or investments by a company. Making capital expenditures on fixed assets can include repairing a roof (if the useful life of the roof is extended), purchasing a piece of equipment, or building a new factory. This type of financial outlay is made by companies to increase the scope of their operations or add some future economic benefit to the operation. Key takeaways about CapEx include:

• CapEx can tell you how much a company invests in existing and new fixed assets to maintain or grow its business.
• CapEx is any type of expense that a company capitalizes or shows on its balance sheet as an investment rather than on its income statement as an expenditure.
• Capitalizing an asset requires the company to spread the cost of the expenditure over the useful life of the asset.
• CapEx can be found in the cash flow from investing activities in a companys cash flow statement.
• Different companies highlight CapEx in a number of ways, and an analyst or investor may see it listed as capital spending, purchases of property, plant, and equipment (PP&E), or acquisition expense.
• CapEx is important for companies to grow or maintain business by investing in new property, plant, equipment (PP&E), products, and technology.
• Financial analysts and investors pay close attention to a company’s capital expenditures, as they do not initially appear on the income statement but can have a significant impact on cash flow.
• Over the life of an asset, total depreciation will be equal to the net capital expenditure.

In summary, CapEx is a term used in finance to describe funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. It is an important metric for companies to grow or maintain their business by investing in new property, plant, equipment (PP&E), products, and technology. Financial analysts and investors pay close attention to a company’s capital expenditures, as they do not initially appear on the income statement but can have a significant impact on cash flow.