FCInv vs CAPEX

CFA Level I FRA
#1

Hello All,

I was reviewing my notes, and I got confused between these two concepts. I have that CAPEX = Capital used to buy fixed assets - Capital received from selling fixed assets.

Now, FCInv is also equal to cash spent on fixed assets - cash received from selling fixed assets.

Aren’t these two terms the same thing?

Moreover, I googled analystforum, and I found that FCInv = Capex - proceed from sales. Now, I am completely lost.

Can someone please guide me using an example?

Best regards,

Allalongthewatchtower

#2

Hi!

In my understanding FCInv equals Net Capex, which is cash spent on fixed assets minus cash received from selling fixed assets.

CFAI Book says: FCInv = Capital expenditures

I too gather they’re the same.

#3

In theory, FCInv (used in free cash flow calculations) should be only that portion of capital expenditures (CAPEX) required to maintain existing capacity (rather than expanding or contracting). In practice, it can be difficult to separate capital investments that merely maintain capacity from those that change capacity, so for practical purposes, FCInv and CAPEX are the same.

#4

Thanks S2000magician and Moosey!

#5

My pleasure.