Capital Expenditures

Capital expenditure (capex) refers to the amount of money that the company has spent on purchasing property, plant & equipment that will be utilised in business operations. The assets purchased are expected to generate economic benefit for the business over the long-term. Usually, the amount spent on capex will be high compared to the total amount of fixed assets held by the business.

For example, if a pizza company decides to purchase another pizza baking oven, the amount spent on the same will be considered as capital expenditure. However, money spent on buying a spare part for the oven will be considered as operational expense because of its low significance and associated low cost.