Definition of Capital Expenditures

Capital expenditure is cash outflow that is not of recurring nature and is a one-off item while calculating the free cash flows. The concept is used in capital budgeting and it very important as it can affect the cash balance at the end of a period while preparing cash flow projections.


Capital expenditure is also included under the head of investing activities in the cash flow statement.

The net capital expenditure is calculated as follows:

Closing CAPEX = Opening CAPEX + Additions – Disposals – Depreciation Expense


The capital expenditure is also described as the change in the net fixed assets during the year.

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