What is Capital expenditure (capex)?
Kapital xarajatlar (capex)
In short
Money spent on long-lived assets — plants, equipment, servers. Subtract it from operating cash flow to get FCF.
Also known as: capital spending
Capital expenditure (capex) is the money a company spends on assets that serve for many years: plants, equipment, buildings, servers, data centres. Unlike an ordinary expense, capex is not charged to the income statement all at once — it is added to the balance sheet as an asset and expensed over the years through depreciation.
Where to find it
In the investing section of the cash flow statement, usually the line "purchases of property and equipment".
Why it matters
Free cash flow = Operating cash flow − Capex. FCF is the money a company can truly use freely for dividends, buybacks or paying down debt. So of two companies with the same profit, the one that needs less capex leaves more cash for shareholders.
Two kinds
- Maintenance capex — replacing worn-out equipment to keep the existing business as it is.
- Growth capex — a new plant, a new market, more capacity.
Companies rarely show this split explicitly. A rough guide: if capex is well above depreciation, the company is investing in growth.
How to judge it
Large capex is not bad in itself — it is an investment in future income. What matters is whether those investments later pay back with a high ROIC.
Profit is an accounting number; cash flow is money that actually came in. FCF is what is left after investment — it can pay dividends or debt.
Example
A hypothetical company, one year ($ millions):
- Revenue 2,000
- Operating cash flow 500
- Capex 200
- Depreciation 150
Calculation:
- FCF = 500 − 200 = 300
- Capex / revenue = 200 ÷ 2,000 = 10%
- Capex / depreciation = 200 ÷ 150 ≈ 1.33 — the company is renewing assets faster than they wear out, so it is also spending on growth.
The next year it raises capex to 400 to build a new plant: FCF = 500 − 400 = 100. The business has not changed, but free cash fell to a third — the thing to watch is whether this investment produces income in later years.
Mistakes and tips
Look at capex over several years in a row — a single year can be skewed by one big project.
EBITDA ignores capex: in capital-intensive businesses rely on FCF, not EBITDA.
When capex jumps, read how management explains it in the MD&A section of the 10-K.
Frequently asked questions
- What is the difference between capex and opex?
- Capex is spent on long-lived assets and depreciated over years. Opex (operating expense) covers running costs like salaries and rent, which are deducted in full from the current period's profit.
- Is high capex a bad sign?
- Not necessarily. If it funds growth projects with high returns it is valuable; but if the business constantly needs heavy capex just to stand still, little cash is left for shareholders.
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