Hellow guys, Welcome to my website, and you are watching CAPEX VS OPEX (5 MAIN DIFFERENCES) Straight to the Point #STTP #268. and this vIdeo is uploaded by The Russian Dude at 2021-04-01T15:10:17-07:00. We are pramote this video only for entertainment and educational perpose only. So, I hop you like our website.
| Name | CAPEX VS OPEX (5 MAIN DIFFERENCES) Straight to the Point #STTP #268 |
| Video Uploader | Video From The Russian Dude |
| Upload Date | This Video Uploaded At 01-04-2021 22:10:17 |
| Video Discription | In around two minutes you will know what are the differences between CAPEX and OPEX. You will get both professional definition and easy explanation. No intro, no outro, straight to the point. ► My 212 Companies Watchlist: https://bit.ly/3cbWL3f ► Get $10 for Opening an Account with Wealthsimple: https://bit.ly/3kzztaD ► Get $25 from Newton (Canada): https://web.newton.co/r/BP8LC6 ► Get $10 in Bitcoin from BlockFi: https://blockfi.com/?ref=ebccda0d ► Get $30 from Shakepay (Canada): https://shakepay.me/r/WZKPBC3 ► Get $20 from Bitbuy: https://bitbuy.ca/sign-up?c=BSLU3WEQE ► Get $10 from Coinbase: https://www.coinbase.com/join/dikare_1 ► Open Binance Account: https://www.binance.com/en/register?ref=U4JK2CR3 ► Download my FREE eBook about Investments: https://bit.ly/2FL2UHI ► Follow Me On Instagram: https://www.instagram.com/artemdkrv/ The main difference between Capital Expenditures and Operating Expenses is their purpose. As well as how are they treated from accounting standpoint, periodicity, predictability, and tax advantages. And if you want to learn what capital expenditures and operating expenses mean individually, feel free to watch my previous videos. Quick example of capital expenditures would be the costs of purchasing and maintaining fixed assets. Buying a factory, servicing cars, repairing equipment, all these are capital expenditures. While salaries, rent, and utilities are operating expenses. So, as you might have already guessed, the first difference is the purpose of CAPES and OPEX. The purpose of capital expenditures is to purchase and maintain fixed assets. Such as equipment, machinery, and buildings. By doing so, a company expects to expand its activities. More factories you have, more goods you can produce. And the purpose of operating expenses is to maintain day to day business activities. You need to keep paying salaries, making rent and lease payments, and so on. If you stop paying your employees, they will quit and your production will be disrupted. The second difference is how these expenses are treated from accounting standpoint. Capital expenditures are considered to be investments. Because a company reinvests money into itself by purchasing or maintaining fixed assets. And like mentioned previously, this is supposed to increase the output. While operating expenses are just your regular day to day expenses. You have to pay them just to keep your business working. The third difference is the periodicity. Capital expenditures are long term. You buy fixed assets and expect to use them for more than one year. For example, a company can purchase a fleet of vehicles to use for 10 years before they are replaced. But operating expenses are short term expenses. For example, salaries in North America tend to be paid biweekly. Meaning that you have to cover this expense every 14 days. The fourth difference is the predictability. Capital expenditures are not so predictable. You can plan when to purchase some fixed assets and expand your business, but you can’t predict when a car breaks down or roof starts leaking. While operating expenses are more or less predictable. For example, if you pay rent during the first week of each month, you already know when the next payment is due. And the fifth difference are tax advantages. Capital expenditures are not tax deductible. But the value of fixed assets can be depreciated throughout the years of useful life of an asset. For example, if you purchased an equipment for $1,000,000, you can depreciate it for 10 years. Meaning that every year $100,000 will be recorded as depreciation expense. Doing so allows to maintain net income on an attractive level for potential investors. And operating expenses are tax deductible. They are subtracted from company’s revenue before taxes are need to be paid. And that is why some managers try to spend as much money as possible on things that will benefit their businesses. Because the majority of such expenses will be tax deductible. After all, same asset classes can sometimes be classified as a capital expenditure or as an operating expense. For example, if you purchase a car for cash, this is your capital expenditure. But if you lease a car, the lease payments that you’ll need to make are considered to be operating expenses. If you find my content interesting, please consider subscribing to my channel. It helps a lot as a beginner creator. And let me know if there is anything you would like to know about personal finances and investing. |
| Category | Education |
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