Capital expenses, often referred to as CapEx, are funds used by a business to acquire, upgrade, or maintain physical assets. These expenses typically involve significant investments in items like buildings, machinery, or equipment that will benefit the company over a long period. Unlike regular operational costs, which are incurred for day-to-day activities, capital expenses are intended to enhance the company's capacity or efficiency. Businesses usually capitalize these expenses on their balance sheets, spreading the cost over the useful life of the asset through depreciation. This accounting method helps reflect the long-term value of the investment, making it easier for stakeholders to assess the company's financial health and future growth potential.