CAPEX and OPEX are two distinct categories of expenses a company incurs in its operations. Here’s an explanation of each term:

CAPEX (Capital Expenditure):

CAPEX refers to the expenses incurred by a company to acquire, upgrade, or maintain physical assets such as buildings, equipment, machinery, vehicles, or land. These expenditures are typically significant and have a long-term impact on a company’s operations. CAPEX investments are made with the intention of generating future benefits and are capitalized on the company’s balance sheet. The costs are usually incurred upfront or over a relatively long period.

Examples of CAPEX include:

Purchasing manufacturing equipment for a factory.
Constructing a new office building.
Buying a fleet of vehicles for delivery service.
Investing in software development or infrastructure.

OPEX (Operational Expenditure):

OPEX refers to the day-to-day operating expenses that a company incurs to maintain its business operations. These expenses are generally recurring and necessary for the ongoing functioning of the company. OPEX covers costs associated with regular business activities, such as salaries, utilities, rent, marketing expenses, office supplies, and maintenance. Unlike CAPEX, OPEX is fully deducted from the company’s income in the year it is incurred.

Examples of OPEX include:

Employee salaries and benefits.
Rent and utilities for office space.
Advertising and marketing costs.
Travel expenses.
Office supplies and consumables.

In summary, the main difference between CAPEX and OPEX lies in the nature of the expenses and their impact on a company’s financial statements. CAPEX represents investments in long-term assets, while OPEX represents the day-to-day operational costs of running a business.