In this video on Capital Expenditure Formula, here we discuss how to calculate CAPEX along with its formula and practical example.
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Capital Expenditure (Capex) Formula measures the companyโs overall purchase of assets in the fiscal year and can be easily measured by adding a net increase in the PP&E value during the year to the depreciation cost for that year.
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CAPEX Formula = Net Increase in PP&E + Depreciation Expense
๐๐ฑ๐๐ฆ๐ฉ๐ฅ๐ ๐จ๐ ๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐ฑ๐ฉ๐๐ง๐๐ข๐ญ๐ฎ๐ซ๐ (๐๐๐๐๐) ๐
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Let us take the example of a company EFG Ltd and calculate capital expenditure in 2017 based on the following given data โ
Depreciation Expense is $20,500 in the income statement
PP&E value at the end of 2017 is $48,500 in the balance sheet
PP&E value at the beginning of 2017 is $42,000 in the balance sheet
Firstly we need to calculate Net increase in PP&E using below formula,
Net increase in PP&E = PP&E value at the end of 2017 โ PP&E value at the beginning of 2017
=48500-42000
=6500
Now we will calculate capital expenditure for the year 2017 by using below formula โ
Capital Expenditure (capex) Formula = Net increase in PP&E + Depreciation Expense
= 6500+20500
=27000
Therefore, Capital Expenditure incurred during 2017 is $27,000.
To know more about the ๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐ฑ๐ฉ๐๐ง๐๐ข๐ญ๐ฎ๐ซ๐ (๐๐๐๐๐) ๐
๐จ๐ซ๐ฆ๐ฎ๐ฅ๐ , you can go to this ๐ฅ๐ข๐ง๐ค ๐ก๐๐ซ๐:-
https://www.wallstreetmojo.com/capital-expenditure-formula-capex/
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