The Procurement Glossary » Capital Expenditure (CapEx)

Capital Expenditure (CapEx)

Finance & Payments

Also known as: CapEx

Definition

Spending on long-lived assets such as equipment, buildings or vehicles, capitalised and depreciated over time.

Explanation

CapEx purchases (machinery, IT infrastructure) are typically high-value, approval-heavy and evaluated on life-cycle cost and ROI. They follow different budgeting and approval paths from routine operating spend.

Example

The new production line is CapEx, approved via a business case and depreciated over ten years.

Related terms

• Operating Expenditure (OpEx) — Day-to-day running costs expensed in the period incurred, such as supplies, utilities, rent and services.
• Life-Cycle Costing — A costing method that sums all costs of an asset across its whole life, from acquisition through operation to disposal.
• Business Case — A structured justification for a proposed decision or investment, weighing costs, benefits and risks.
• Budget — A financial plan allocating expected spend across categories, departments or projects for a period.

Frequently Asked Questions

What is Capital Expenditure (CapEx)?

Spending on long-lived assets such as equipment, buildings or vehicles, capitalised and depreciated over time. CapEx purchases (machinery, IT infrastructure) are typically high-value, approval-heavy and evaluated on life-cycle cost and ROI. They follow different budgeting and approval paths from routine operating spend.

Can you give an example of Capital Expenditure (CapEx)?

The new production line is CapEx, approved via a business case and depreciated over ten years.

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