Definition

Noun: - The cost of long-term improvements: Money spent by a business to acquire, upgrade, or maintain physical assets such as property, buildings, technology, or equipment. This spending is for long-term benefits and is not used for day-to-day operational expenses.

Usage

Capital expenditure represents a significant financial investment intended to generate value or benefit over a long period, typically more than one year. It is often abbreviated as CAPEX. This type of spending is capitalized, meaning the cost is spread out (depreciated or amortized) over the useful life of the asset, rather than being fully deducted in the year it was purchased.

Examples

• Noun:
  • The company's major capital expenditure this year was for a new manufacturing plant.
  • Approving the budget for capital expenditure requires careful analysis of the expected return on investment.
  • The hospital announced a large capital expenditure to modernize its surgical wards.

Advanced Usage

• Capital Expenditure vs. Operating Expenditure (OPEX): A key distinction in accounting and finance. Capital expenditure is for long-term assets, while operating expenditure is for the daily costs of running a business (e.g., rent, utilities, salaries).

  • The finance team must classify the new server purchase correctly—is it a capital expenditure or an operating expense?

• Capital Expenditure Budget: A financial plan outlining the expected costs for major purchases or projects over a specific period.

  • The board reviewed the five-year capital expenditure budget for infrastructure upgrades.

Variants and Related Words

• Capitalize (verb): In accounting, to record a cost as an asset (capital expenditure) rather than an expense.

  • The firm decided to capitalize the development costs of the new software.

• Capital Asset (noun): A long-term asset acquired through capital expenditure.

  • Buildings and machinery are typical capital assets.

Synonyms

• Investment in fixed assets
• Capital outlay
• Capital investment

Related Phrases

• CAPEX approval process: The formal procedure a company uses to review and authorize significant capital expenditures.

  • The project is stalled waiting for CAPEX approval from the committee.

• To incur capital expenditure: To make or become liable for a capital expense.

  • The expansion plan will cause the company to incur substantial capital expenditure next fiscal year.

Noun

1. the cost of long-term improvements