What type of expenditure does CAPEX refer to?

Capital expenditure, commonly referred to as CAPEX, pertains to the funds used by an organization to acquire, upgrade, and maintain physical assets. This includes property, buildings, machinery, and equipment that are essential for conducting business operations and generating revenue over the long term. CAPEX is often characterized by its focus on long-term investments that enhance a company's productive capacity, contrasting with operational expenditure (OPEX), which deals with the ongoing costs for running a business day-to-day.

Understanding CAPEX is crucial as it reflects a company's investment in future growth and operational efficiency. When a business allocates funds for CAPEX, it expects these investments to generate returns over several years, emphasizing financial planning and strategic foresight in procurement and supply chain management.