Capital Expenditures (CapEx)
Also called CapEx
Capital Expenditures are funds a company uses to acquire, maintain or upgrade its PP&E (Plant, Property & Equipment) or technology.
CapEx is reported as an asset under PP&E on the Balance Sheet and reported as a cash outflow under the Investing Activities section of the Cash Flow Statement.
💡 CapEx is important for the Free Cash Flow (levered and unlevered) calculation, which you use in both DCFs and LBOs.
In the room
CapEx is subtracted in every free cash flow build, so it shows up in both DCFs and LBOs. Know the distinction between maintenance CapEx — what it costs to keep the business running — and growth CapEx, because sponsors underwrite them very differently.