1. What is the Capex Ratio?

The Capex Ratio (Capital Expenditure Ratio) measures the proportion of a company's revenue that is spent on capital expenditures. It indicates how much a company is investing in maintaining or expanding its asset base relative to its sales.

2. How Does the Calculator Work?

The calculator uses the Capex Ratio formula:

Where:

• Capital Expenditures — Funds used by a company to acquire, upgrade, and maintain physical assets
• Revenue — Total income generated from normal business operations

Explanation: The ratio shows what percentage of each dollar earned is being reinvested in the business.

3. Importance of Capex Ratio

Details: The Capex Ratio helps investors and analysts understand a company's growth strategy. A higher ratio may indicate more aggressive investment in future growth, while a lower ratio might suggest maintenance of existing assets.

4. Using the Calculator

Tips: Enter capital expenditures and revenue in the same currency (typically dollars). Both values must be positive, and revenue cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Capex Ratio?
A: The "ideal" ratio varies by industry. Capital-intensive industries (like telecom or utilities) typically have higher ratios than service-based businesses.

Q2: How does Capex Ratio differ from CapEx to Sales ratio?
A: They are essentially the same metric, just with different names.

Q3: Should Capex Ratio be high or low?
A: It depends on context. A high ratio could indicate growth investment or inefficiency, while a low ratio might show underinvestment or operational efficiency.

Q4: How often should Capex Ratio be calculated?
A: Typically calculated quarterly or annually when financial statements are released.

Q5: Does Capex Ratio include R&D expenses?
A: No, R&D is typically considered an operating expense, not a capital expenditure.