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A capital expenditure (Capex) is an expense incurred by a business for an asset that will be used for more than a year in the operations of the business. This includes acquiring something new or improving the company’s existing assets. Capex can cover things like purchasing furniture, trucks, machinery, computers and data center equipment, and making infrastructure repairs like fixing or upgrading the plumbing. Capex can also cover the expenses involved in starting a new business, or acquiring an existing one.

Capex is a major purchase that will be used over time, rather than consumed in the year it was purchased. Businesses are careful with the distinction between Capex and Opex (operational expenditures) because of the tax implications. Opex can be written off entirely in the year it is incurred, but Capex must be depreciated and amortized over a period of several years. Because these costs take a long time to recover, most companies budget for Capex purchases separately from their Opex budget.