Capital Expenditures (CapEx)

What is Capital Expenditures (CapEx)?

Cash a company spends to buy, upgrade, or maintain long-term physical assets such as property, plants, and equipment, reported in the cash flow statement.

Overview

Capital expenditures (CapEx) are the cash a company spends to buy, build, upgrade, or maintain long-term physical assets such as buildings, machinery, equipment, and technology infrastructure. CapEx appears in the investing section of the cash flow statement, usually as purchases of property, plant, and equipment (PP&E).

Unlike ordinary operating costs, CapEx is not expensed right away. The asset is recorded on the balance sheet and its cost is spread over its useful life through depreciation. CapEx is the amount subtracted from operating cash flow to arrive at free cash flow.

Also Known As: CapEx, Capital Spending, Purchases of Property, Plant and Equipment

Formula

CapEx = Purchases of Property, Plant and Equipment

Read directly from the investing section of the cash flow statement

Balance sheet estimate: When the cash flow line is not available, CapEx can be approximated as Ending Net PP&E − Beginning Net PP&E + Depreciation. This ignores asset sales and impairments, so the reported cash flow figure is preferred.

Maintenance vs. Growth CapEx:

Maintenance CapEx: Spending needed to replace worn-out assets and keep current capacity running. Companies rarely disclose it; depreciation is often used as a rough proxy
Growth CapEx: Spending that adds capacity, such as new plants, stores, or data centers, and is meant to raise future revenue
Total CapEx: Maintenance plus growth CapEx, the single figure companies report in the cash flow statement

Sign convention: Because CapEx is a cash outflow, companies report it as a negative number in the cash flow statement, for example (45) or −45. Many data providers, including FinSpry, display it as a positive amount and subtract it when calculating free cash flow.

Calculation Example

A hypothetical company reports these figures for its latest fiscal year:

Company XYZ - Cash Flow and Income Data:

Purchases of PP&E (as reported)	−$45 million
Operating Cash Flow	$112 million
Depreciation	$25 million
Revenue	$600 million

Step 1: CapEx as a positive amount

CapEx = |−$45M|

= $45 million

Step 2: Free cash flow

FCF = $112M − $45M

= $67 million

Step 3: Context ratios

CapEx ÷ Revenue = $45M ÷ $600M = 7.5%

CapEx ÷ OCF = $45M ÷ $112M ≈ 40.2%

Estimated growth CapEx = $45M − $25M = $20M (using depreciation as the maintenance proxy)

Result: Company XYZ reinvested about 40% of its operating cash flow in physical assets and kept $67 million of free cash flow. If depreciation is a fair proxy for maintenance needs, roughly $20 million of the spending went toward growth.

How FinSpry Calculates It

FinSpry uses the capital expenditures line reported in each company's cash flow statement and handles it the same way as operating cash flow:

TTM by default: the four most recent quarterly values are summed; if four quarters are not available, the latest fiscal-year value is used
Stored as a positive amount: the absolute value is kept, so a reported outflow of −$45M is shown as $45M
Converted to USD: figures in other reporting currencies are converted at the latest available exchange rate
Feeds free cash flow: FCF = TTM operating cash flow − TTM CapEx, calculated only when both values exist

You can see all three numbers together in the Cash Flow (TTM) block of each stock's Statistics page. Some analysts also count purchases of intangible assets or capitalized software as CapEx; FinSpry uses the reported capital expenditures figure as is.

How to Interpret

CapEx shows how much a company must reinvest to stay in business and how much it chooses to invest for growth. The level only makes sense relative to the company's size, industry, and cash generation.

General Guidelines:

CapEx Comfortably Covered by OCF

The company funds its investment program from operations and still produces free cash flow for dividends, buybacks, or debt repayment.

CapEx Well Below Depreciation for Years

Free cash flow looks strong, but the asset base may be aging. Underinvestment can lead to higher repair costs or lost competitiveness later.

CapEx Exceeding OCF

Free cash flow is negative and the gap must be funded with cash reserves, debt, or new equity. This can be a deliberate build-out phase, so check whether the spending is earning a return.

Industry context: Utilities, telecom, energy, and manufacturing are capital intensive and routinely spend a large share of revenue on CapEx. Software and many service businesses need far less. Compare CapEx to revenue against direct peers rather than the whole market, and pair it with return on invested capital to judge whether the spending pays off.

Limitations

No maintenance split: companies report one total, so the maintenance and growth portions are estimates.
Lumpy timing: large projects can make CapEx jump in one year and fall the next, which distorts single-period free cash flow.
Leases and acquisitions: assets obtained through leases or by buying another company are not counted as CapEx, so asset-light reporting can understate true investment.
Definition differences: whether intangible purchases or capitalized development costs are included varies by company and data source.

Related Cash Flow Metrics

These metrics are used alongside CapEx in cash flow analysis:

Operating Cash Flow

Cash generated by the core business; CapEx is subtracted from it to get free cash flow.

Free Cash Flow

The cash remaining after CapEx, available for dividends, buybacks, and debt repayment.

Free Cash Flow per Share

Free cash flow divided by shares outstanding, useful for comparing cash generation to the share price.

Payback Period

The time a capital project needs to recover its initial cost, a common test for individual CapEx decisions.

Use This Metric

Screen stocks by measures that reflect CapEx, such as FCF margin, FCF yield, and price to free cash flow.

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