Capital expenditures, commonly known as CAPEX, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment.
Formula to calculate capital expenditure.
Net Increase in PP&E – The net increase in PP&E during a year can be calculated by deducting the PP&E value at the beginning of the year from the PP&E value at the end of the year.
Example:
A company’s financial statement states that its net increase in PP&E is $ 50,000 and its depreciation expense value is 30,000. Determine the company’s capital expenditure.
Thus, the company’s capital expenditure is $80,000.
