CapEx
Capital Expenditure
Short definition
Capital expenditure is a cash outlay for a long-lived asset. It does not hit profit immediately; it reduces cash and free cash flow and capitalises an asset.
Detailed explanation
The capitalisation threshold and repair-versus-replace split differ under IFRS and tax. On the cash-flow statement it is investing; it does not move EBITDA but does move FCF and CFADS.
A CFO splits maintenance (protecting the current cash engine) from growth (extra volume or a new line). Reading both as “investment went up” mis-states debt capacity. IFRS 16 leases and capitalised software can be the same economic decision as cash capex.
Why it matters for the CFO
A bank pack wants CFADS after maintenance capex; booking growth as maintenance inflates DSCR. Approval lag in the budget breaks the 13-week cash view.
How to read it
Capex / depreciation below 1 is an eroding asset base; above 1 is growth or catch-up replacement. Do not call capex “high” without sector asset intensity. Deferral eases cash now and returns as downtime and lost growth.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.