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Capital Expenditure or CapExis is the funds a company uses to purchase, maintain and upgrade its physical assets, which include lands, infrastructure, machinery, plants, and technology. CapEx is primarily used to invest in fixed assets to improve output, and in new projects to expand the business.
Formula to calculate CapEx:
Investments made on fixed assets include repairs of existing infrastructure and equipment, purchases of new machinery, construction of buildings, etc. These investments widen the scope and increase the economic value of a company.
Contrary to what the name suggests, Capital Expenditure is shown as an investment in the balance rather than as an expenditure in the income statement. CapEx says when, how, and where the company is investing its capital. An expense is categorized as CapEx when it is spent on new assets or for maintenance of the existing ones.
