Capital Exp. Vs. Working Capital:
Capital expenditure and working capital are two different concepts in accounting and finance.
Capital expenditure
It refers to the money spent on long-term assets that are expected to provide benefits for more than one accounting period. These assets include property, plant, and equipment (PP&E), intangible assets, and investments. Capital expenditure is recorded on the balance sheet as an asset, and the cost is depreciated over the useful life of the asset.
Working capital
On the other hand, refers to a company’s short-term assets and liabilities that are used in its day-to-day operations. Working capital represents the amount of a company’s short-term assets that are available to cover its immediate liabilities. Working capital is used to finance a company’s ongoing operations and is a measure of its liquidity.
In summary, the key difference both are that capital expenditure refers to long-term investments in assets, while working capital refers to a company’s short-term assets and liabilities used in its day-to-day operations.
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