Decoding capital expenditure

Capital expenditure is the money spent on installing new capacity such as plant and machinery. Naturally, an increase in capex is positive as it indicates higher revenue and profits in the future. However, capex doesn't immediately yield results; its effect is felt over time. For instance, Reliance Industries incurred significant capital expenditure for its telecom venture Reliance Jio during the last five years. Jio has now started yielding results for its parent. Since capex cycles are long term in nature, they require patience on the part of investors before they come to fruition.