Capital Expenditures (Cap Ex)
Concept summarized by Sam Mishra, MBA (MIT Sloan)
Expenditures incurred to acquire long term assets. Long term assets are usually plants and machinery, commercial real-estate: office space / ware-house space, IT (Information Technology ) infrastructure / IS (Information Systems) projects, etc. From a macro-economic perspective, if companies cut back on their Cap Ex, it can signal a slowing economy. On the other hand, if companies increase their Cap Ex, that increased spending on Cap Ex helps in the overall growth of an economy. For example, at the time of this writing (April / May 2007), reports increasingly suggest that amidst a housing slump, the three pillars which keep the economy / GDP growing are Cap Ex or capital spending, consumer spending, and exports.