Glossary

Capacity Utlilization is usually expressed as a percentage which measures how much of a total manufacturing output capacity is being used at a given point in time. It can be used to measure a machine, production line, factory, company, industry or sometimes country.

Capital Expenditure (CAPEX) is money spent by a company to acquire or upgrade physical assets, from trucks, to machinery, to whole factory facilities.

Capex is recorded separately from day-to-day costs, because tax authorities often encourage this investment with special allowances; and also because it is helpful to view the cost of a capital item as if it is spread over the useful life of the item. See also Capital Purchase.

Capital Purchases are investments in production plants, equipment, buildings, and other fixed assets. These assets are intended to raise the revenue-earning capacity of a company. A capital purchase can be paid for from cash reserves and/or by borrowing money. Either way, accountancy procedures will help show the value of the asset, and its annual cost to the business, spread over its useful life. See also Capital Expenditure.