Capital Expenditures

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Financial Times  Apr 10  Comment 
The structural shift towards payouts in the US has been much less evident in Japan, despite lower profitability, due to lack of shareholder action
The Hindu Business Line  Apr 3  Comment 
NMDC has incurred its highest capital investment in a single year at Rs 2,518 crore in 2013-14 on various expansions and modernisation plans.“Pursuing its capital investment schemes, as agai...
Yahoo  Mar 26  Comment 
Orders for long-lasting U.S. manufactured goods rebounded in February, but a surprise drop in a gauge of planned spending on capital goods pointed to sluggish economic growth this quarter. The Commerce Department said on Wednesday orders for...
Clusterstock  Mar 26  Comment 
February U.S. durable goods orders data are out. Total orders rose 2.2% in February after falling a downwardly-revised 1.3% in January, beating consensus estimates for a 0.8% rise. Orders of durable goods excluding transportation items...
Cellular News  Mar 25  Comment 
Revenue growth rates for communications service providers (CSPs) remain modest, but CSPs will continue to invest heavily in their networks, expects Ovum. Click here for more.
Financial Times  Mar 23  Comment 
India’s market rally is partly based on hopes that low capital expenditure will be reversed if opposition leader Narendra Modi wins the May election
Wall Street Journal  Mar 23  Comment 
As industry upgrades plant and equipment, providers stand to profit.
SeekingAlpha  Mar 17  Comment 
By Cyniconomics: We get experts on everything that sound like they're scientific experts … They'll sit at a typewriter and make up all this stuff as if it's science and then become an expert … Now, I might be quite wrong, maybe they do...
SeekingAlpha  Mar 13  Comment 
By Cullen Roche: As I've noted elsewhere, the government's deficit and the surge in business spending (primarily dividends and investment) have been the key drivers of the economic growth as well as the corporate profits boom. But with the budget...
Clusterstock  Mar 12  Comment 
Many economists forecasting on accelerating U.S. GDP growth are banking on hope that business investment will pick up in 2014. They've argued that aging equipment and a general pent-up demand for these capital goods represent a bullish economic...




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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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