What does the term 'capital expenditure' refer to?

The term 'capital expenditure' refers to long-term investments in physical assets, such as property, plant, and equipment. These expenditures are critical for a business as they are intended to improve the productive capacity or extend the useful life of assets rather than resulting in immediate revenue. Capital expenditures often involve significant sums of money and have a lasting effect on the company's financial position, as they are typically capitalized on the balance sheet and depreciated over time rather than expensed in the current period. This contrasts with other types of expenditures, such as operational costs or immediate revenue-generating activities, which are aimed at short-term benefits rather than long-term asset development.