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Capital Expenditures

What are Capital Expenditures?

Capital expenditures (CapEx) are funds that a company spends on the acquisition, improvement, or replacement of fixed assets, such as property, plant, and equipment (PP&E). Capital expenditures are typically recorded on a company's balance sheet as an asset, rather than as an expense.

Capital expenditures can include a wide range of expenditures, from the purchase of new equipment to the construction of a new building. These expenditures are typically significant and are intended to benefit the company over the long term.

One important aspect of capital expenditures is their impact on a company's cash flow. While capital expenditures can improve a company's operations and financial position over the long term, they can also require a significant amount of cash to be paid out up front. As a result, companies must carefully manage their capital expenditures to ensure that they have the funds they need to operate and grow their business, while also maintaining financial stability.

Capital expenditures are an important component of a company's financial position and reflect its investment in long-term assets. By carefully managing their capital expenditures, companies can improve their operations and financial position over the long term, while also maintaining strong cash flow and financial stability.