Capital expenditures are payments for goods or services that are recognized or capitalized on a company’s balance sheet, rather than expensed on the income statement.
Spending is important for companies to maintain existing property and equipment, as well as invest in new technology and other growth assets.
If an asset has a useful life of less than one year, it should be expensed in the income statement rather than capitalized, which means it is not considered a capital expense.
Unlike CapEx, operating expenses (OpEx) are short-term expenses used for the day-to-day operations of a business.
Examples of capital expenditures include the purchase of land, vehicles, buildings, or heavy equipment.
Accounting ratios, an important subset of financial ratios, are a group of metrics used to measure a company’s performance and profitability based on its financial statements.
The acid test, or quick ratio, compares a company’s shortest-term assets to its shortest-term liabilities to see if the company has enough cash to pay off its immediate liabilities, such as short-term debt.
Activity Ratio broadly describes any type of financial measure that helps investors and analysts evaluate how effectively a company is using its assets to generate revenue and cash.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
Benefit Cost Ratio (BCR) is a measure showing the relationship between the relative costs and benefits of a proposed project, expressed in monetary or qualitative terms.
The CAPE ratio is used to analyze the long-term financial performance of a public company, taking into account the impact of various economic cycles on the company’s profit.