Capital Expenditure (CapEx)

Explanation: CapEx refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment.

Example: Purchasing new baking ovens for your bakery is a capital expenditure.

Potential Issues: Misclassification or mismanagement of CapEx can distort a company’s financial analysis. Overspending on CapEx can strain cash reserves, while underspending can hinder a company’s growth and operational efficiency.