In Schweser example, I don’t understand the difference between the $4.5 million put in on day 10 and day 22 vs. the $1,350,000 capital expenditures. $4.5 million goes in to capital employed calc, but $1.35 million doesn’t, and opposite is true for the capital return calc. Can someone explain?
CAPEX is capital outlays used to maintain an asset base and occur as a normal course of business. think of capital employed as capital inflows and outflows of a fund. that sentence isn’t entirely accurate but should help simpfy the problem you’re having.
I’m not getting the difference. The question says “they input another $3,000,000”. How do I know this is not CAPEX? For example, say I bought a commercial office building for $10M. I “input” $3,000,000 more on Day 22. What is it about that input that makes it capital invested and not a capital expenditure? Was it because I bought the parking garage attached to it? Or I renovated the space and turned it into residential condos? Or I simply cleaned and painted? I don’t think I’d know how to distinguish between the two. Is it just me?
bought / sold are key words for additional capital. they put in another $3mln or they renovated $3mln are key words for CAPEX. What you do to a place after you own it is CAPEX. What you do to gain control or sell control to someone else are capital flows.