The CAPEX, Capital Expenditures or capital expenditures, It is the amount of money that is allocated to the acquisition of assets that will improve the productivity of a company.
CAPEX can be considered to be vehicles for the transport of merchandise, equipment (either production or computing that will be assigned to the processes of increase and production efficiency), buildings and machinery.
An expense is considered as Capital Expenditures when the asset that is acquired is part of the investment, This investment is focused on increasing productivity or increasing the useful life of a productive asset that the company has.
It’s about a expense to be capitalized as an asset for the company through its amortization.
Capital Expenditures It is the investment that a company makes to expand its capital assets and its importance is that it determines the evolution of the company in factors such as increased productivity, profits, the useful life of other machinery and equipment, among others.
In this sense, capital spending is related to the growth of the company, cash flows and information about the objective of the company, if you invest to continue your growth and expansion or if you just work to stay.
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Importance of CAPEX for SMEs
Especially For small and medium-sized companies, CAPEX is important because it constitutes a relevant indicator about the moment the company is experiencing in a given period, that is, if it is for expansion or maintenance within its production parameters.
In general, when the company is starting up, the CAPEX is high, because like any company, it requires equipment, machinery, buildings, premises, vehicles, etc., that intervene in the proper development of productive activity.
When the company is growing, the investments are higher than the depreciation of the fixed assets, which means that the value of the equipment assets is increasing rapidly.
Some examples of Capital Expenditures
As we mentioned earlier, this It is the investment that a company makes in the acquisition of equipment, machinery and even software licenses with which it seeks to improve its productive capacity or expand in the market.
In this sense, some examples are: the purchase of new computers to manage customer portfolios, as useful information processors for the company, or simply as equipment on which production factors such as design, quality, materials, etc. are based.
They are also considered as Capital Expenditures the new production plants, the storage spaces for merchandise or products as well as supplies, or the purchase of vehicles to transport and ship merchandise.
CAPEX as an investment can be:
For him maintenance or replacement of equipment, whose investments are necessary to avoid deterioration of these before daily use and constitutes a minimum expense for the company to maintain its production.
For expansion, which constitutes investment in non-current assets -also known as immobilized- that the company does to increase sales, which would be the result of the increase or improvement of those it has.
The Fixed assets of a company is the infrastructure that it requires for it to function and operate properly, and includes physical assets such as machines, computer equipment, administration packages, accounting and company patents, up to vehicles and the company building.
In order to know if a certain company invests in the development and growth of its activity or simply remains in its consolidation stage, it is necessary to know all the CAPEX with respect to the payments it makes. If CAPEX is higher, it means that the company invests for its expansion and growth, going beyond maintaining what it has.