As you look at defining CAPEX and OPEX, you’ve got to get to the the real worlds. When you talk CAPEX you're talking capital expenditures. When you talk OPEX you're talking operating expenditures. So in business you've got all sorts of ways in which you spend money. All we're talking about when we say capital expenditures vs. operating expenditures is how are you spending that money. So operating expenses refers to your day-to-day expenses. Stuff like labor and utility costs. Versus capital expenditures where you're taking your cash and you're investing in long-term investments. This would be stuff like buildings, equipment, vehicles, and even intangible assets. So anything I'm going to invest in for my business that's a multi-year use, I'm going to use it longer than a year period of time, I'm going to end up capitalizing that. They call it capital expenditures.
Basically as you look at CAPEX versus OPEX there's two different types of budgets or two different allocation of dollars that you need to be tracking towards. It's important for you to understand as an individual because you'll hear it talked about. We have these capital budgets or we have operating budgets. You'll be asked "are you going to expense this as an operating expense or a CAPEX?" To understand how should I allocate those dollars or those expenses make sure I'm recording them correctly. This information needs to be sent correctly to our executives is vitally important in any business. So the more you understand about the difference between capital budgets or capital expenditures being long-term investments versus your day-to-day expenses (what you call your operating expenses), it'll set you apart in your organization.
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