Capex
A capital expenditure (capex) is the money a company spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, or equipment. This spending is considered an investment because it should eventually lead to increased revenue.
Companies report their capex on the cash flow statement. Cash flow is the movement of money in and out of a company. The cash flow statement shows a company’s cash inflows and outflows over a period of time. Capex is recorded as a negative number on the cash flow statement because it uses up cash.
Capex is different from operating expenses (opex). Operating expenses are the day-to-day costs of running a business, such as rent, utilities, and salaries. These expenses are considered part of the normal cost of doing business and are not capitalized like capex.
Investors watch a company’s capex closely because it can be an indicator of future growth. If a company is investing heavily in new assets, it likely believes that these assets will generate enough new revenue to justify the expense.
