Capital expenditure, or CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. CapEx is often used to undertake new projects or investments by the firm. This type of financial outlay is also made by companies to maintain or increase the scope of their operations.
A capital expenditure is the use of funds or assumption of a liability in order to obtain or upgrade physical assets. The intent is for these assets to be used for productive purposes for at least one year. This type of expenditure is made in order to expand the productive or competitive posture of a business. Examples of capital expenditures are funds paid out for buildings, computer equipment, machinery, office equipment, vehicles, and software. An example of an asset upgrade is adding a garage onto a house, since it increases the value of the property, whereas repairing a dish washer merely keeps the machine in operation.Capital expenditures tend to be quite substantial in certain industries, such as utilities and manufacturing.