Capital Expenditure (CapEx)
Definition
Money spent on long-term assets, like equipment, racking, vehicles or major software builds, that will benefit the business for more than a year. It goes on the balance sheet and is depreciated over time.
Want a deeper explanation?
Separating CapEx from operating expenses keeps your monthly profit honest. A big equipment purchase is not a bad month; it is an investment.
CapEx still uses real cash, though, so it shows up in your cash flow and free cash flow even when it barely touches the P&L. Watch for: large purchases expensed all at once, which makes profit swing and can affect tax planning.
Example
You spend $60,000 on warehouse racking and a forklift. Instead of a $60,000 expense this month, it becomes an asset depreciated over several years.