Capital expenditure
Capital Expenditure
Capital Expenditure (pronounced: /ˈkapɪt(ə)l ˌɛks(p)ɛnˈdɪtʃər/), often abbreviated as CapEx, is a term used in business and accounting to describe funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment. CapEx is often used to undertake new projects or investments by the firm. This type of financial outlay is also made by companies to maintain or increase the scope of their operations.
Etymology
The term "Capital Expenditure" is derived from the Latin word 'caput' meaning 'head', and the English word 'expenditure' meaning 'the action of spending or using up something'. In this context, it refers to the 'head' or main part of a company's investment, which is spent or used up in the acquisition or improvement of long-term assets.
Related Terms
- Operating Expenditure (OpEx): This is the money a company spends on an ongoing, day-to-day basis to run a business or system. Unlike CapEx, OpEx are fully deducted from profit in the year they are made.
- Depreciation: This is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy.
- Amortization: This is the process of gradually writing off the initial cost of an asset.
- Return on Investment (ROI): This is a performance measure used to evaluate the efficiency or profitability of an investment.
- Cash Flow: This is the net amount of cash and cash-equivalents being transferred into and out of a business.
See Also
External links
- Medical encyclopedia article on Capital expenditure
- Wikipedia's article - Capital expenditure
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