What Is Capital Expenditure?

By Jeremy Bowman – Updated Sep 10, 2025 at 12:58 PM EST

Key Points

Capital expenditures are key investments in long-term assets like buildings and tech infrastructure.
High capex can indicate a company's focus on growth but needs wise spending to ensure profitability.
Evaluating a company's capex relative to revenue helps assess its growth potential against competitors.

Understanding financial terms is essential to being a successful investor, and that includes understanding the three financial statements: the income statement, balance sheet, and cash flow statement.

On the cash flow statement, one of the most important components is capital expenditures.

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A man in a factory works on new capital purchases. — Image source: Getty Images.

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Free Cash Flow (FCF)

Learn what free cash flow (FCF) is and why it matters so much to investors. Get real examples of FCF in business & learn to calculate this number.

Capital expenditures don't affect the income statement directly, but they affect the cash flow statement -- the free cash flow statement, in particular, which is operating cash flow minus capital expenditures.

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How to Read a Balance Sheet

Understanding a company's financials is crucial to successful investing. Learn about balance sheets and why they're important.

Profit and Loss Statement

Making sense of a P&L statement can help guide your investments. We show you how.

How to Calculate Capital Expenditure Depreciation Expense

Accounting for the decline in capital asset value over time.

How Are Stock Prices Determined?

Every stock has a price. Learn how it gets calculated, plus check out a few examples of share price valuations.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Walmart. The Motley Fool has a disclosure policy.