Definition of capital expenditure/spending

Capital expenditures or capex are investments in assets that will have a long life such as property, plant, and equipment. In accounting terms, the money spent will not run through the income statement directly but will appear on the cash flow statement. Capital investments will be depreciated and the depreciation expense will run through the income statement over multiple periods.

Capex differs from revenue expenditure, which in accounting terms is used to cover repair and maintenance charges that do not enhance a company's earning capacity. For example, a company might repair a piece of machinery at a factory, but it will not result in the machine producing any more goods.

 

capex in the news

In September 2013, an FT Alphaville blog considered the mismatch between cash flow in the US, the UK, the euro area and Japan and their capital expenditure. At 8.1 per cent of GDP, the writer noted, capex in those areas was still below the trough set in the 2001/2002 recession.

FT Articles & Analysis

No articles are associated with this term