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Capex (capital expenditure)

Contributor(s): Brita Van Fossen

A capital expenditure (Capex) is money invested by a company to acquire or upgrade fixed, physical, non-consumable assets, such as a building, a computer or a new business. Generally, there are two types of capital expenses: purchases made to maintain existing levels of operation within a company and purchases intended to foster future growth.

A capital expenditure can be tangible, such as a copy machine, or it can be intangible, such as patent. In many tax codes, both tangible and intangible capital expenditures are counted as assets because they have the potential to be sold if necessary.

To qualify as a capital expense, an asset's usefulness must exceed one year. In the United States, the length of depreciation is based on the number of years the asset is likely to be useful. For example, if a company purchases a fleet of servers for its data center, the value would depreciate over a five year period.

Capex can be compared to Opex, which stands for operational expenditure. Operational expenditures are used up during the same fiscal year they are purchased. If a company decided to spend money with Amazon Web Services (AWS) instead of purchasing servers, that expenditure would be operational and could only be deducted during the year in question. 

See also: enterprise asset management (EAM), cost management, adaptive enterprise, capacity planning, business impact analysis (BIA)

This was last updated in February 2015

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