Capital Expenditures

RECENT NEWS
The Economic Times  Sep 25  Comment 
Telenor is about to receive an FIPB approval for increasing the stake from 74 per cent to 100 per cent in Uninor, he said.
Automotive World  Sep 23  Comment 
Automotive manufacturers in Europe, the Middle East, and Africa (EMEA) are investing heavily in capital expenditure (capex) and research and development (R&D) to achieve their growth ambitions. A report published today, titled “EMEA...
OilVoice  Sep 22  Comment 
Canamax Energy Ltd. TSX VENTURE CAC announce that the Company39s board of directors has approved an increased capital expenditure program for the period from June 2014 through to December 31 2
The Hindu Business Line  Sep 10  Comment 
About 40 per cent of new stores will come up in smaller towns
The Economic Times  Sep 9  Comment 
The domestic capex cycle will take time to pick up, but given the fact that the company is also concentrating on the overseas market.
SeekingAlpha  Sep 5  Comment 
By Ben Kramer-Miller: Almaden Minerals (NYSEMKT:AAU) just announced an updated PEA on its Ixtaca Project in Mexico. The goal of this update was to show how the project can generate more value for investors by reducing initial capex. The company...
Financial Times  Sep 1  Comment 
Decline in capital expenditure is concentrated in the manufacturing sector, although overall it is still stronger than estimates assumed
The Hindu Business Line  Aug 31  Comment 
Great Eastern Shipping, the largest private sector liner in the country, plans to invest up to $380 million or around Rs 2,300 crore in acquiring vessels and on a rig by March 2017, a senior offic...
The Straits Times  Aug 29  Comment 
August 30, 2014 1:02 AM COMMODITIES trader Olam International may be selling off some partial stakes in assets and will stick to a plan to cut down on capital expenditure.
newratings.com  Aug 29  Comment 
CHESHUNT (dpa-AFX) - British supermarket chain Tesco Plc. (TSCO.L, TSCDY.PK) Friday said it now expects trading profit for 2014/15 to be in the range of 2.4 billion pounds to 2.5 billion pounds. Trading profit for the six months ending August 23...




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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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