Fundamental analysis
Capital expenditures (capex)
Definition
Cash spent on long-lived assets such as equipment, buildings and software, to keep the business running or to grow it.
Example
Say company XYZ generates $120 million of operating cash flow and spends $50 million on capex: $30 million to replace worn-out machines and $20 million on a new warehouse. Its free cash flow is $120 million − $50 million = $70 million. The replacement spending comes back every year, while the warehouse is growth spending the company could pause in a lean year.
Hypothetical numbers, for illustration only.
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