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The Finance Book by Si Hussain, Stuart Warner

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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:

Opex Capex
DefinitionExpenses incurred in running a business. Also referred to as revenue expenditure. DefinitionPayments to purchase or improve long-term assets.
ExamplesSalaries, administration costs, marketing, ...

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