Capex vs Opex
The distinction between capital expenditure (long-term asset investment, capitalised on the balance sheet) and operating expenditure (period cost, expensed through the P&L).
Also known as: Capital expenditure vs operating expenditure, Capex/Opex distinction
Capex
Capital expenditure is investment in long-term assets (machinery, IT systems, buildings) — recorded as an asset and depreciated over its useful life.
Opex
Operating expenditure is a period cost (rent, salaries, consumables) — fully expensed in the year incurred.
Why it matters in TS
Aggressive capitalisation (booking opex as capex) inflates EBITDA by keeping costs off the P&L. TS teams review accounting policies and compare capitalisation rates to peers and prior years.
Related terms
Maintenance Capex vs Growth Capex
The split of capital expenditure between spending required to maintain existing capacity (maintenance) and spending to expand the business (growth).
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
D&A (Depreciation & Amortisation)
The systematic allocation of the cost of tangible (depreciation) and intangible (amortisation) long-term assets over their useful lives.