Advanced English Dialogue for Business – Capital expenditure

Listen to a Business English Dialogue about Capital expenditure

Gabriel: Hi Piper, do you know what “capital expenditure” means in finance?

Piper: Yes, I think it’s when a company spends money to acquire or upgrade physical assets like property, equipment, or machinery.

Gabriel: That’s correct. Capital expenditures are investments made by companies to improve their long-term productivity or expand their operations.

Piper: Can you give an example of a capital expenditure?

Gabriel: Sure. Purchasing new manufacturing equipment or renovating a company’s office space would both be considered capital expenditures.

Piper: How do capital expenditures differ from operating expenses?

Gabriel: Operating expenses are day-to-day costs incurred in running a business, like salaries, utilities, and rent, whereas capital expenditures are investments in assets that provide benefits over multiple years.

Piper: How are capital expenditures funded?

Gabriel: Companies can finance capital expenditures through a variety of sources, including cash reserves, bank loans, or issuing bonds.

Piper: Are there any benefits to making capital expenditures?

Gabriel: Yes, capital expenditures can lead to increased efficiency, productivity, and competitiveness, which can ultimately drive revenue and profit growth for the company.

Piper: What factors do companies consider when deciding whether to make a capital expenditure?

Gabriel: Companies consider factors like the expected return on investment, the lifespan of the asset, future growth prospects, and available financing options.

Piper: Can capital expenditures impact a company’s financial statements?

Gabriel: Yes, capital expenditures are typically recorded on a company’s balance sheet as assets, and the associated depreciation expense is recorded on the income statement over time.

Piper: How do investors view capital expenditures?

Gabriel: Investors often see capital expenditures as a positive sign that a company is investing in its future growth and long-term sustainability.

Piper: It seems like capital expenditures play a crucial role in helping companies expand and improve their operations.

Gabriel: Absolutely, they’re essential for maintaining and enhancing a company’s competitive position in the market.