How is CapEx different from Operating Expenses?

CapEx, or Capital Expenditure, refers to the funds that a company spends on acquiring or upgrading long-term assets, such as property, equipment, or technology, that are expected to generate income for the business over several years. CapEx is a one-time investment that is recorded on the balance sheet and depreciated over time.

Operating expenses, on the other hand, refer to the day-to-day expenses that a company incurs to keep its business running. Examples of operating expenses include salaries and wages, rent, utilities, advertising, and office supplies. These expenses are typically recurring and are recorded on the income statement as they are incurred.

In general, the main difference between CapEx and operating expenses is that CapEx is an investment in the future growth of the company, while operating expenses are necessary to keep the business operating on a daily basis. Capital expenditures are intended to generate long-term benefits for the business, such as increased production capacity or improved efficiency, while operating expenses are intended to maintain the status quo and keep the business running smoothly.