1. What is Capex?

Capital expenditures (Capex) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. This is often used to undertake new projects or investments by the company.

2. How Does the Calculator Work?

The calculator uses the Capex formula:

Where:

• \( Ending\ PP\&E \) — Property, plant and equipment at end of period
• \( Beginning\ PP\&E \) — Property, plant and equipment at start of period
• \( Depreciation \) — Depreciation expense during the period

Explanation: The formula calculates capital expenditures by accounting for changes in PP&E while adjusting for depreciation expenses that reduce PP&E's book value.

3. Importance of Capex Calculation

Details: Capex is a crucial metric for investors and analysts as it shows how much a company is investing in future growth. High Capex may indicate expansion, while low Capex might suggest maintenance mode.

4. Using the Calculator

Tips: Enter all values in the same currency. Values should come from consecutive balance sheets (beginning and ending PP&E) and the income statement (depreciation).

5. Frequently Asked Questions (FAQ)

Q1: Where can I find these numbers in financial statements?
A: PP&E is on the balance sheet, depreciation is typically in the cash flow statement or income statement.

Q2: Why add back depreciation?
A: Depreciation reduces PP&E's book value but isn't an actual cash outflow. We add it back to reflect actual capital spending.

Q3: What if PP&E decreased during the period?
A: The formula still works - it will show net capital expenditures (could be negative if disposals exceeded additions).

Q4: Does this include intangible assets?
A: No, this calculates capex for tangible assets only. Intangible investments would be calculated separately.

Q5: How does this relate to free cash flow?
A: Capex is subtracted from operating cash flow to calculate free cash flow, a key financial metric.