Capital Expenditures (CapEx)

Capital Expenditures are expenses on:

  • Fixed assets such as equipment, property, or industrial buildings
  • Fixing problems with an asset
  • Preparing an asset to be used in business
  • Restoring property
  • Starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%. A great company with a Durable Competitive Advantage will have a ratio of less than 25%. Less is better.

 

Equations

 

For a good company:

Capital Expenditures for a good company

 

For a great company with a Durable Competitive Advantage:

Capital Expenditures for a company with a Durable Competitive Advantage