Capital Expenditures are expenses on:

• Fixed assets such as equipment, property, or industrial buildings
• Fixing problems with an asset
• Preparing an asset to be used in business
• Restoring property
• Starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%. A great company with a Durable Competitive Advantage will have a ratio of less than 25%. Less is better.

Equations

For a good company:

For a great company with a Durable Competitive Advantage: