Capital expenditures are the amount of money that a company spends on property, its plant and equipment to reinvest in its business. Calculate the amount of a company’s capital expenditures in an accounting period from its cash flow statement. A company shows the cash spent on these purchases in parentheses in the “Investing Activities” section of its cash flow statement to represent cash outflows. Capital expenditures vary by industry and company. Spending money on capital expenditures may lead to future growth, but it limits the amount of available cash for a company to distribute to stockholders as dividends.
Find the middle section of the company’s cash flow statement, labeled “Cash Flows from Investing Activities.”
Identify the dollar amount from line item “Purchase of Equipment,” which will be shown in parentheses. For example, if the company’s cash flow statement shows “Purchase of Equipment ($50,000),” it spent $50,000 for the purchase of equipment during the accounting period.
Identify the dollar amount from line item “Purchase of Land,” which will be shown in parentheses. In the example, assume the company purchased land for $200,000.
Identify the dollar amount from line item “Purchase of Buildings,” which will be shown in parentheses. In the example, assume the company bought buildings for $400,000.
Calculate the sum of all items to determine the company’s total capital expenditures for the accounting period. In the example, the sum of $50,000, $200,000 and $400,000 is $650,000 in capital expenditures for the period.
Compare the amount of a company’s capital expenditures with those of its competitors to determine if it is spending more or less cash to reinvest in its business.