Capex, short for capital expenditure, represents the funds spent by a company to purchase, improve, or maintain its long-term assets, including properties, buildings, equipment, or technology systems. These are critical investments aimed at enhancing or maintaining operational capacity and efficiency. Unlike operational expenditures, which are recurring costs for everyday functions such as rent or utilities, capital expenditures refer to major purchases or upgrades that provide value over a long period of time.

For example, a company may incur capex when purchasing new machinery to increase production capacity or upgrading its technology infrastructure to improve operational efficiency. Similarly, if a company decides to construct a new office building or renovate an existing facility, these costs are categorized as capital expenditures. Capex is important for businesses to grow, stay competitive, and adapt to new market demands.

In accounting, capital expenditures are typically recorded as assets rather than expenses, and their cost is allocated over the asset's useful life through depreciation. This ensures that the financial impact of these significant expenditures is spread out over the years during which the assets generate operational benefits for the company.