Capex vs. Opex

Difference Between Capex and Opex

In business assessment CAPEX and OPEX are the terms quite often used. What is the true worth of a business and how does the worth of a business change over time are calculated in terms of Capital Expenditures and Operating Expenditures. Sometimes it’s seen that shares of IT companies abruptly pitch, which increases the evaluation of the company. In the world of today where economy is dominated and is dependent on knowledge, CAPEX and OPEX have solved the puzzle of brand equity.

Business assessment often starts with the measurement of CAPEX and OPEX.

CAPEX

Tangible and intangible assets come under CAPEX. Keeping in mind the future gains, these expenditures are made, and this adds to the shareholder’s value. Financial statements show such statements as cash flow. Such assets get depreciated each year till it becomes zero.

OPEX

Operating Expenditure (OPEX) refers to expenses that are there because of CAPEX. Daily expenses due to sales, R&D and administration are taken as OPEX. This relates that expenses related to OPEX are essential to uphold capital assets. Earnings before interest, figure that draws interests of people from management to shareholders, is achieved by subtracting OPEX from operating revenue.

Difference between OPEX and CAPEX

The complexities in differences between OPEX and CAPEX have increased particularly in companies where products and services are driven by knowledge workers.

External investments can be made to CAPEX. But these investments need to be returned to the investors in the end with interest.

OPEX can be considered to be (in) efficiency of any business. It has a direct relation with the value of the business. If you are able to bring down OPEX without effecting day to day operations then you can increase the value of your business.

 

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