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Capital expenditures are the funds used to acquire or upgrade a company's fixed assets, such as expenditures towards property, plant, or equipment (PP&E). [3] In the case when a capital expenditure constitutes a major financial decision for a company, the expenditure must be formalized at an annual shareholders meeting or a special meeting of the Board of Directors.
Capital expenditures either create cost basis or add to a preexisting cost basis and cannot be deducted in the year the taxpayer pays or incurs the expenditure. [3] In terms of its accounting treatment, an expense is recorded immediately and impacts directly the income statement of the company, reducing its net profit.
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a project to a commercially operable status.
Since it may be a large number, maintenance capex's uncertainty is the basis for some people's dismissal of 'free cash flow'. A second problem with the maintenance capex measurement is its intrinsic 'lumpiness'. By their nature, expenditures for capital assets that will last decades may be infrequent, but costly when they occur.
Gross fixed capital formation (GFCF) is a component of the expenditure on gross domestic product (GDP) that indicates how much of the new value added in an economy is invested rather than consumed. It measures the value of acquisitions of new or existing fixed assets by the business sector , governments , and "pure" households (excluding their ...
A capital campaign is "an intensive fundraising effort designed to raise a specified sum of money within a defined time period to meet the varied asset-building needs of an organization". Asset-building activities include the construction, renovation or expansion of facilities (for example, a new building), the acquisition or improvement of ...
A = Capital recovery (amortization) factor F = Sinking fund amortization factor I = Investment S = Estimated salvage value = Operating expense stream d = CCA rate per year for tax purposes t = rate of taxation n = number of years i = cost of capital, rate of interest, or minimum rate of return (whichever is most relevant) and where