Capital Expenditure (CapEx) Calculator
Calculate CapEx from balance sheet PP&E changes and depreciation.
Find CapEx-to-revenue ratio and compare capital intensity across industries.
Capital Expenditure (CapEx) Formula
Capital Expenditure (CapEx) is money spent on acquiring, upgrading, or maintaining physical assets like property, plants, and equipment (PP&E). Unlike operating expenses, CapEx is capitalized on the balance sheet and depreciated over time.
Formula from the Balance Sheet:
CapEx = Ending PP&E − Beginning PP&E + Depreciation Expense
This formula works because:
- PP&E increases when you buy new assets
- PP&E decreases when depreciation reduces book value
- Adding back depreciation reverses that decrease, isolating actual cash spent
Maintenance CapEx vs Growth CapEx
Maintenance CapEx: Spending required just to keep existing assets operational — replacing worn-out equipment, routine upgrades. This is the minimum required to sustain current revenue.
Growth CapEx: Additional spending beyond maintenance to expand capacity, enter new markets, or improve competitiveness.
The distinction matters because only growth CapEx drives future revenue increases. Companies that confuse the two may overpay for assets that merely replace existing capacity.
CapEx-to-Revenue Ratio
CapEx to Revenue Ratio = CapEx ÷ Revenue × 100
This ratio reveals how capital-intensive a business model is.
Capital Intensity Benchmark Table
| Industry | CapEx / Revenue | Character |
|---|---|---|
| Utilities (electric/gas) | 20–35% | Extremely capital-intensive |
| Telecom | 15–25% | Very capital-intensive |
| Oil & Gas | 15–30% | Very capital-intensive |
| Airlines | 10–20% | Capital-intensive |
| Manufacturing | 5–15% | Moderate |
| Retail | 2–5% | Low |
| Technology (hardware) | 5–10% | Moderate |
| Software / SaaS | 1–5% | Asset-light |
| Consulting / Services | < 2% | Asset-light |
Worked Example
A manufacturing company’s annual report shows:
- Beginning PP&E (net): $2,400,000
- Ending PP&E (net): $2,750,000
- Depreciation Expense: $320,000
- Annual Revenue: $8,000,000
- CapEx = $2,750,000 − $2,400,000 + $320,000 = $670,000
- CapEx / Revenue = $670,000 ÷ $8,000,000 = 8.4% (moderate, typical for manufacturing)
Relationship with Free Cash Flow
Free Cash Flow = Operating Cash Flow − CapEx
A company with strong OCF but high CapEx may have limited FCF for shareholders. This is why capital-intensive industries often trade at lower earnings multiples than asset-light software businesses — the cost of sustaining and growing the business is simply much higher.
Pro Tips
- CapEx is reported on the Cash Flow Statement under Investing Activities (as a cash outflow labeled “Purchase of PP&E”).
- Rapidly declining CapEx can be a warning sign — management may be underinvesting in the business to make short-term cash flow look better.
- For valuing companies, analysts often estimate a “normalized” CapEx that accounts for lumpy large investments spread over multiple years.
- Depreciation is a non-cash expense — it is added back in cash flow analysis. CapEx is the real cash cost.