What is Capital Expenditure (CapEx)?

Capital Expenditure (CapEx) refers to the funds a company uses to acquire, upgrade, and maintain long-term physical assets such as property, buildings, vehicles, or equipment. These are investments in the business that are expected to provide a benefit for more than one year.

For Startups: For software startups, CapEx is usually low (e.g., purchasing laptops). However, for hardware or manufacturing startups, CapEx can be very significant (e.g., buying machinery). CapEx is not expensed immediately on the income statement; instead, the asset is "capitalized" on the balance sheet and then depreciated over its useful life. This is a key distinction from Operating Expenses (OpEx).

Example: A startup spends ₹20 Lakhs on new servers for its data center. This is a capital expenditure. The ₹20 Lakhs will be added to the assets on the balance sheet and then expensed systematically through depreciation over the next few years.