Buildings and Property

A purchase or upgrade to a building or property

would be considered a capital purchase since
the asset has a useful purpose for many years.
Purchases of property, plant, and equipment
are often facilitated using secured debt or a
mortgage, for which the payments are made
over many years.

Interest expenses associated with debt

financing may be depreciated as well as the
cost of the asset. However, costs incurred with
an issue of stock would not qualify for
depreciation.
Upgrades to Equipment
In the manufacturing industry and other
industries, machinery used to produce goods
may become obsolete or simply wear out.
Upgrades to the equipment are often are
needed. If these upgrades are higher than the
capitalization limit that is in place, the costs
should be depreciated over time. Similar to
buildings or property, equipment upgrades are
often financed. The cost of this financing may
be depreciated as well.

Software Upgrades
Software expenditures are a significant cost for
large companies. Costs to upgrade or purchase
software are considered CapEx spending and
can be depreciated.

Computer Equipment
Technology and computer equipment,
including servers, laptops, desktop computers,
and peripherals would be capital expenditures.
Vehicles
Companies often need a fleet of vehicles for
distribution or to carry out services for
customers, such as delivery companies. These
vehicles are considered capital expenditures.
However, the costs associated with leasing
vehicles are treated as operational expenses.

Intangible Assets
Assets for capital expenditures don't all need to
be physical assets or tangible, but instead, can
be intangible assets. If a company purchased a
patent or a license, it could be considered a
capital expenditure.

Special Considerations
Capital expenditures usually involve a
significant outlay of money or capital, which
often requires the use of debt. Given the
expensive nature of capital expenditures,
investors closely monitor how much debt is
being taken on by a company to ensure the
money is being spent wisely.
Long-term debt includes debt-servicing costs,
such as interest expenses. Companies must
generate enough revenue to be able to service
the debt payments as well as the interest
payments.

Although capital expenditures are an indicator

for demonstrating the level of investment in a
company by its management, too much debt
can put the company into financial trouble.

Also, capital expenditures that are poorly

planned or executed can also lead to financial
problems in the future. For example, if a
Company's management team buys new
technology that quickly becomes obsolete, the
company would be stuck with the debt
payments for many years without much
revenue generated from the asset.

Some industries are more capital-intensive than

others, such as the oil and gas industry where
companies need to buy drilling equipment. As a
AC
result, it's important for investors to compare