What is capital expenditure primarily used for?

Capital expenditure, often referred to as capex, is primarily used for investing in fixed assets. These assets are typically physical, long-term resources such as buildings, machinery, equipment, and vehicles that a business acquires or upgrades to enhance its productive capacity or efficiency. Unlike operational expenditures, which cover the ongoing costs necessary for running day-to-day business activities, capital expenditures are aimed at creating future benefits and are usually significant in value, impacting the company's long-term growth and revenue-generating ability.

When a company invests in fixed assets, it is typically making a strategic decision to improve or expand its operational capabilities, thereby laying the groundwork for future revenue generation. Therefore, the indication that capital expenditure is focused on long-term investments emphasizes its role in fostering sustainable business growth and operational efficiency.