Capital expenditure, or capex, refers to funds used by a business to purchase assets such as property or equipment. Capex usually is utilised to increase the capacity of business operations or to maintain current operations. While it may be easy to find capital expenditures from within the business, it can be more challenging to find capital expenditures as a potential investor. Investors may look at capex as a way to determine how much cash the company is investing in future operations. Companies with higher than normal capex may be expecting higher than normal revenues.
- Skill level:
- Moderately Easy
Obtain the annual report for the company in question. If the company does not issue an annual report, request a copy of the business's most recently audited financial statements. Make this request through the investor relations department online or through the company's treasurer or chief financial officer.
Examine the Cash Flow Statement, sometimes called the Statement of Cash Flows. This is usually the last financial statement and includes a breakdown of how the company obtains and uses cash from operations, investments and financing activities.
Scroll down to Cash Flow from Investing. Search for the line item called Investments in Property, Plant and Equipment. This is the cash amount spent on capital for the year.
Refer to the notes on the financial statements. Most annual reports contain notes about capital expenditures. Find information about current capital expenditures as well as plans for future capital investments. The notes also may provide a breakdown of maintenance capex and new capex. Maintenance capex is used to maintain operations, while new capex is a sign of additional investment in capacity.
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