What is CAPEX?

The meaning of capex is the expense that a company makes in capital goods and that causes benefits for a company. organization, either through the purchase of new fixed assets or through an increase in the value of existing fixed assets. This term can also be translated as Capital Expenditure.

Capex is the cash that a company allocates to maintain its fixed assets in stable production and operating conditions, which at the same time serves to keep a business running. Examples of capex include the acquisition of new computers, delivery vans or office supplies.

The importance of CAPEX in the company

In terms of accounting, the precise expenses to face all these investments are capitalized if they help to increase the useful value of the asset in question, and the company must distribute this capitalized expense throughout its useful life. In the event that the expense only serves to maintain the asset in its current condition, the expense is not capitalized and will acquire the deductible expense feature.

Capex is a very important parameter for companies, since it is an indicator of the life cycle in which the organization is at a specific time.

In general, at the beginning of a company, the capex will be high, since every company requires a series of equipment to carry out the appropriate professional activity normally. In the event that the organization develops rapidly, the capex will be higher than the depreciation of fixed asset, which shows that the value of capital goods is rising rapidly.

On the other hand, if the capex is similar or lower than the depreciations, it will be a clear sign that the organization is decapitalizing and it will reflect an evident decline.


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