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Glossary
Profit & cash

Capex

Capital expenditure

Money spent on physical assets: factories, machines, servers, vehicles.

Capex is split into two kinds that the accounts rarely separate for you. Maintenance capex is what the company must spend simply to keep running at its current size. Growth capex is what it spends to get bigger.

The distinction matters enormously. A business whose entire cash flow is consumed by maintenance capex is running to stand still, and is worth far less than one that can grow while spending very little.

Figure

The divergence that precedes most disasters

Y1Y2Y3Y4Y5Reported profitOperating cash

Reported profit climbing while the cash it supposedly generated goes nowhere. Either customers are not paying, or the sales were never really made.

Why it matters

It is the difference between a business that produces cash for its owners and one that merely produces revenue.

The mistake everyone makes

Being impressed by high EBITDA in a business with brutal capex requirements. Airlines and steel mills are the classic examples.

Related terms

Free cash flow
The cash actually left over after the business has paid to keep itself alive.
EBITDA
Profit before the four things that make companies look different from one another.
Depreciation
Spreading the cost of a physical asset over the years it is used.

See Capex on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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