What is the difference between CAPEX and Operating Expense?
Understand the Problem
The question is asking about the differences between capital expenditures (CAPEX) and operating expenses (OPEX), which are key concepts in finance and accounting. CAPEX refers to the funds used by a company to acquire, upgrade, and maintain physical assets, while OPEX refers to the costs incurred in the day-to-day operations of a business. The user seeks to understand these distinctions.
Answer
CAPEX are long-term investments capitalized and depreciated; OPEX are day-to-day expenses fully expensed in the period incurred.
The main difference between CAPEX and OPEX is their purpose and accounting treatment. CAPEX are large purchases used beyond the current accounting period and are capitalized and depreciated, while OPEX are day-to-day expenses incurred to keep the company running and are fully expensed in the period they are incurred.
Answer for screen readers
The main difference between CAPEX and OPEX is their purpose and accounting treatment. CAPEX are large purchases used beyond the current accounting period and are capitalized and depreciated, while OPEX are day-to-day expenses incurred to keep the company running and are fully expensed in the period they are incurred.
More Information
Capital expenditures often involve purchasing fixed assets like buildings, equipment, or technology that have a useful life of several years. Operating expenses include costs like rent, utilities, and wages that are necessary for daily business functions.
Sources
- The web page with info on - Example Source - investopedia.com
- CapEx vs. OpEx: What's the Difference? - Integrify - integrify.com
- CapEx vs OpEx for Cloud, IT Spending, & More - Splunk - splunk.com
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