Which of the following is a common example of capital expenditure?

Capital expenditures, often referred to as CapEx, are funds used by a business to acquire, upgrade, or maintain physical assets such as property, buildings, technology, and equipment. These expenditures are crucial for a company's long-term growth and operational efficiency as they represent investment in the future.

Purchasing new machinery fits this definition of capital expenditure perfectly. It is a significant investment that enhances a company's production capacity, improves efficiency, or allows for the introduction of new products. Unlike operating expenses, which are short-term and involve the day-to-day functioning of the business, capital expenditures typically provide benefits over a longer period, often requiring financing or careful budgeting due to their high cost.

In contrast, paying employee salaries, utility bills, and raw material costs are classified as operating expenses. These expenses are incurred regularly as part of the company’s ongoing business operations and do not usually result in the acquisition of long-term assets. Such expenses reflect the ongoing costs necessary to keep the business running on a day-to-day basis, rather than investments in future growth.