Capital Expenditures

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The Times of India  2 hrs ago  Comment 
BUZZ-S&P 500 earnings results show capex recovery - BofA-ML:BUZZ-S&P 500 earnings results show capex recovery - BofA-ML
The Hindu Business Line  4 hrs ago  Comment 
TVS Motor Company is lining up new model launches and investments in product development and capacity expansion that will grow its market share in two-wheelers. The two- and three-wheeler manufactu...
The Economic Times  Mar 22  Comment 
The company will invest Rs 350 crore in capital expenditure, garnered through internal accruals, and launch one scooter and one motorcycle in the next fiscal.
The Economic Times  Mar 17  Comment 
Godrej group chairman Adi Godrej said that almost certain rollout of GST from July will be the key driver of private consumption considerably which should begin from the second half of the next fiscal.
The Hindu Business Line  Mar 16  Comment 
NOCIL on Thursday said its board of directors has approved the expansion of capacities of rubber chemicals and their intermediates at the company’s plants at Navi Mumbai and Dahej. The company will i...
The Hindu Business Line  Mar 13  Comment 
Kerala leads in fixed capital expenditure, finds NSSO survey
The Economic Times  Mar 11  Comment 
Analysts and industry representatives expect the industry to return to normalcy in capital expenditure in the next fiscal if improvement in margins is sustained.
WA Business News  Mar 9  Comment 
Perth-based explorer Kula Gold says it could save $US25 million, or 27 per cent, on the cost of building its Woodlark Island gold project in Papua New Guinea if done so in the current economic environment.
Reuters  Mar 8  Comment 
Japan's economy grew more than earlier estimated in the fourth quarter as capital expenditure grew at its fastest in almost three years, welcome news for policymakers as they begin to discuss how to wind down years of massive stimulus.




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A Capital Expenditure is money a company spends to acquire or upgrade a business asset.

Common examples of a capital expenditure include the purchase of a new building, or the cost of significant upgrades to the equipment in an existing facility. In accounting, a capital expenditure is "capitalized", which means the cost or value of the underlying asset is adjusted for tax purposes and will now include the capital spent to upgrade it. A capital expenditure is considered to be deductible for tax purposes, because it represents an improvement to the business. But it cannot be deducted all at once, in the year in which the money was spent, if the property acquired or upgraded has a useful life longer than the taxable year. In this situation the capital expenditure is subject to Depreciation and Amortization and is deducted over the expected life of the item, rather than all at once, which is what happens with repair or maintenance expenditures.

Thus there is an important distinction between expenses that are "capitalized" by a company and those that are "expensed." A cost for repair or maintenance will appear on a company's Financial statement one time, as a cost incurred that month. But a capital expenditure will be amortized over multiple years, as the value of the underlying asset declines over time, on a company's balance sheet.

Capital expenditure is synonymous with 'capital spending' or 'capital expense' and is also know as CAPEX. The counterpoint of capital expenditures is Operating Expense or OPEX. This is the on-going cost for running a product, business, or system, as opposed to CAPEX which is the cost of developing or providing the parts necessary to make the product or system. For example, the purchase of a laptop computer is a capital expenditure, but the cost of the broadband internet subscription that a worker needs in using the computer is an operating expense.

Applications of CAPEX

Capex is commonly found on the Cash Flow Statement as "Investment in Plant Property and Equipment" or something similar in the Investing subsection. Publicly traded companies will often list their capital expenditures for the year in annual reports, which allows stockholders to see how the company is using their money and whether it is investing in its long-term future. Most companies have yearly capital expenditures as they consistently upgrade facilities and equipment.

Examples of CAPEX vs OPEX

  1. A company buys a copy machine (CAPEX); and buys toner and paper to operate it (OPEX).
  2. Installing a new bathroom in company offices (CAPEX); fixing the broken toilet so workers can use it (OPEX).
  3. Large media agency acquires a smaller media company in a cash-and-stock deal (CAPEX); pays the cost to move existing employees into the consolidated company's new offices (OPEX).
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