From the course: Business Acumen for Project Managers

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Insights on Capital Expenses (CapEx) and Operational Expenses (OpEx)

Insights on Capital Expenses (CapEx) and Operational Expenses (OpEx)

From the course: Business Acumen for Project Managers

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Insights on Capital Expenses (CapEx) and Operational Expenses (OpEx)

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- [Instructor] As a project manager, you may be asked about capital expenses, operational expenses, and depreciation, especially when budgeting for large projects. It can seem overwhelming at first but it's important, and no one is born an expert in this stuff, so we all have to start learning somewhere. Let's break it down, starting with capital expenditures or CapEx. This refers to large investments in long-term assets like buildings, equipment, or software. These purchases are meant to be used for several years and are usually capitalized on the balance sheet, meaning that their value gets added to the value of the business. In contrast, operating expenses, or OpEx, cover the day-to-day costs of running a business like utilities, salaries, or software subscriptions. Here's a simple way to think about it. Buying a company truck is CapEx. Paying for fuel is OpEx. Operational expenses like fuel are typically fully deductible in the year that they're incurred. In other words, they…

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