7 Opex and capex
‘Control your expenses better than your competition. This is where you can always find the competitive advantage.’
Sam Walton, founder of Walmart (10 Rules for Building a Business)
In a nutshell
Opex (operating expenditure) is money spent on running a business. It is recognised in the profit and loss account.
Capex (capital expenditure) is money spent on ‘long-term investments’. It is recognised in the balance sheet.
Need to know
The key differences between opex and capex are shown in the table below:
|DefinitionExpenses incurred in running a business. Also referred to as revenue expenditure.||DefinitionPayments to purchase or improve long-term assets.|
|ExamplesSalaries, administration costs, marketing, ...|