CapEx vs OpEx: Comparing Capital Expenditures & Operating Expenses
- Laura
This involves determining whether the expenditure is capital or operating in nature. A general rule of thumb is that if the expenditure extends the useful life, increases the capacity, or improves the efficiency of an existing asset, it is considered CAPEX. If the expenditure merely maintains the current condition of an asset or is consumed within the same accounting period, it is considered OPEX. For example, replacing a broken window of a building is OPEX, while installing a new security system for the building is CAPEX. CapEx can be externally financed, which is usually done through collateral or debt financing.
Capital Expenditures (CapEx)
These expenses recur regularly and are directly tied to the business’s operational efficiency. OpEx, however, is fully deductible in the year it’s incurred, offering immediate tax relief. This can significantly improve cash flow by reducing taxable income in…
Leer más