Capital Expenditures

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TheStreet.com  Jun 4  Comment 
NEW YORK (TheStreet) -- U.S. companies would be far better off in the long term reinvesting in their businesses rather than buying back their own shares. And according to Ben Fulton, CEO of Elkhorn Investments, so would their shareholders.  "The...
The Economic Times  May 29  Comment 
Modi, who has completed one year in power this week, managed to hit a budget deficit goal of 3.9 per cent of GDP in the fiscal year to March.
The Australian  May 28  Comment 
The Australian dollar was sharply weaker today on news of a sharp fall in projected business investment in the coming fiscal year.
newratings.com  May 28  Comment 
CANBERA (dpa-AFX) - The Australian dollar weakened against the other major currencies in the Asian session on Thursday on disappointing domestic capex data for the first quarter of 2015, which increased the odds of a rate cut. Data from...
Mondo Visione  May 27  Comment 
Nasdaq announced that Elkhorn Investments will list a new exchange-traded fund (ETF), The Elkhorn S&P 500 Capital Expenditures ETF (Symbol:CAPX), which will begin trading on The Nasdaq Stock Market today, May 27, 2015. "We are excited to bring...
The Economic Times  May 13  Comment 
Aditya Birla group telecom major Idea Cellular was planning a capex of around Rs 5,500 crore in the current fiscal to strengthen its infrastructure.
The Australian  May 12  Comment 
BHP Billiton has set out to convince doubters that its commitment to a progressive dividend remains intact.




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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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