What is capital expenditure?

Capital expenditure refers to funds used by a business to acquire, upgrade, or maintain physical assets such as property, buildings, equipment, and machinery. This type of expenditure is typically a significant investment aimed at enhancing the overall capacity or efficiency of the business. Capital expenditures are critical for long-term growth since they improve or expand the physical resources that drive production and operational capability.

In contrast, the other options focus on expenses that do not contribute to fixed asset growth or enhancement. Marketing and advertising expenses, while important for business visibility and sales growth, are classified as operating expenditures, not capital expenditures. Short-term loans used for operational costs also fall under operating expenses, as they deal with the day-to-day functioning of the business and not the acquisition or upgrading of long-term assets. Similarly, funds allocated for employee salaries and wages are vital for ongoing operations but do not pertain to capital expenditure since they do not involve the purchase or enhancement of physical assets.