Short definition: Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.
Explanation: These investments are made to expand a company’s operations or improve its efficiency. CapEx is often considered a sign of a company’s growth potential as it invests in its future. It is also an important component of a company’s cash flow statement and can be used to assess its financial health.
Example: Examples of CapEx include purchasing new machinery, building a new factory, or upgrading computer systems. These investments are typically made with the expectation of generating future cash flows and improving the company’s long-term profitability.
Additional information (optional): CapEx is a key factor in evaluating a company’s financial performance, as it indicates the level of investment in its future growth. However, high CapEx can also put a strain on a company’s cash flow and increase its debt burden.