Financial Terms / capital expenditure

What is Capital Expenditure (CAPEX)?

Capital Expenditure (CAPEX) is an investment that companies make to acquire, upgrade, or maintain physical assets such as property, plants, buildings, technology, or equipment to expand their operations.


CAPEX = Net Fixed Assets + Net Increase in Working Capital

How do I calculate the capital expenditure?

When calculating Capital Expenditure (CAPEX), one of the most straightforward methods is to refer to the cash flow statement section in the company's financial statements. This is the most reliable source for the information as it is directly taken from the company's books. Additionally, CAPEX can also be derived from the income statement and balance sheet. If you wish to calculate CAPEX manually, you can use the following formula: 

CAPEX = Net Fixed Assets + Net Increase in Working Capital

Net Fixed Assets refers to the cost of building or purchasing new assets such as land, buildings, and equipment, while Net Increase in Working Capital refers to the additional spending on inventory and other current assets. Therefore, by summing these two amounts, you get the total CAPEX. To make the calculation easier, you can use programs such as Sourcetable to make the calculation faster and more accurate.

What is CAPEX?

CAPEX stands for Capital Expenditure and is a type of expense incurred by businesses to purchase, improve, or extend the life of an asset. It is found in a company's cash flow statement.

How is CAPEX different from other expenses?

CAPEX is different from other expenses because it is used to purchase assets that have long-term benefits and are expected to last for more than one year. Other expenses are used to purchase items that have short-term benefits and do not last for more than one year.

Where can I find information about a company's CAPEX?

Information about a company's CAPEX can be found in its cash flow statement.

How do businesses calculate CAPEX?

Businesses calculate CAPEX using the following formula: CAPEX = Purchase Price + Installation Costs + Maintenance Costs + Depreciation

Key Points

How do I calculate capital expenditure?
CAPEX = Net Fixed Assets + Net Increase in Working Capital
Capital Expenditures
Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets. This includes investments in property, plant, building, and equipment and can be used to undertake new projects or investments. The amount of capital expenditures a company makes depends on the industry it is in.
Acquiring Assets
Capital expenditures are used to acquire physical assets that can be used within the company. This can include buildings, equipment, and land. The amount of capital needed to acquire these assets varies depending on the specific asset and the industry.
Upgrading Assets
Capital expenditures can also be used to upgrade existing assets. This can include remodeling a building, replacing equipment, or making technology upgrades. Upgrading assets can help a company stay competitive in their industry.
Maintaining Assets
Capital expenditures can also be used to maintain existing assets. This includes regular maintenance and repairs to ensure the assets are in good condition and functioning properly. Regular maintenance can help to extend the life of the assets and reduce repair costs in the long run.

Make Better Decisions
With Data

Analyze data, automate reports and create live dashboards
for all your business applications, without code. Get unlimited access free for 14 days.