Capital Expenditure
Funds used to acquire or upgrade physical assets.
Capital expenditures (CapEx) are funds spent to acquire, upgrade, or extend the life of long-term physical assets like equipment, buildings, vehicles, and technology. CapEx is recorded on the balance sheet as an asset and depreciated over time, rather than immediately expensed. This differs from operating expenses, which are fully deducted in the period incurred.
Example
A restaurant spends $75,000 on a kitchen renovation—this capital expenditure is recorded as a leasehold improvement asset and depreciated over the remaining lease term.
Why It Matters for Your Business
CapEx decisions are among the largest investments a business makes, and understanding the cash flow impact versus income statement impact helps you plan financing and tax strategies.
Related Terms
More Business Terms
Accounts Reconciliation
Ensuring account balances match between different records.
Break-Even Point
The sales volume at which revenue equals costs.
Budget
A financial plan estimating income and expenses.
Financial Forecast
A prediction of future financial performance.
Financial Statements
Reports summarizing financial performance and position.
Related Financial Guides & Resources
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