Definition of Capex
Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following:
- Actual amounts that were spent during a recent accounting period for additions to property, plant and equipment, and/or
- Planned amounts that will be spent for future additions to property, plant and equipment
When the depreciable assets that are included in capex are put into service, their costs will be depreciated over the years of their useful lives. This means the costs of these assets will be spread over many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold.
The total capex amount that was spent in a recent accounting period is reported in the statement of cash flows within the section described as investing activities. Since the capex amount is an outflow of cash, it is reported as a negative amount. Financial analysts may subtract the capex amount from the company’s cash from operating activities to arrive at the company’s free cash flow.
Examples of Capex
A few examples of items that may be included in capex are:
- New equipment
- Building additions
- Purchasing land and buildings
- Land improvements
- New delivery trucks
- Required OSHA and environmental improvements
A company’s planned capex projects and their costs are likely detailed in a company’s capital expenditures budget (or capex budget).
