CAPEX = Capital Expenditures - expenditures aimed, for example, at obtaining Fixed Assets (investments in building assets which willl be used as core for operations) OPEX = Operational Expenditures - expenditures aimed to sustain company operations (example: raw materials, electricity, insuranse, taxes, rents, payrolls etc.) Fixed costs are different dimension, for example: Rent of your office cost 1000$/year (which is OPEX - because sustain entity operations), but called FIXED, because independent of entity activity (doesn't matter how much company sold - it will still pay 1000$/year). If we produce 100 or 1000 cans of Coke - office rent will not change. In opposite to FC, we have: Variable Costs, for example: - raw materials to produce company products, or provide services: they are inline with business activity. If we produce 100 we will pay 1$ per can of raw materials, -> then cost will be equal to 100$. But if we produce 1000 -> we will pay 1000$. Thus - those are VARIABLE. ... however, in long-term -> Fixed Costs considered Variable (or semi-variable!),which just means that office cost will be increased to 1200$ in 5 years (to compensate inflation).

What's the difference btw opex, capex and fixed costs?

Thanks!

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When preparing for case interviews, you'll quickly find that "fixed costs" and "variable costs" always come up. These concepts are important not only for financial analysis but also for strategic decision-making in companies. Let’s explore what these costs are and how you can skillfully use them in your cases. ✨ What are Fixed and Variable Costs?Fixed Costs are expenses a company incurs regularly, regardless of how much it produces or sells. These costs stay constant whether the company is active or not. Typical fixed costs include:RentSalaries for full-time employeesAdministrative expensesDepreciationWhether a company sells a lot or just a little, these fixed costs still need to be covered. They form the basis of a company’s cost structure and are crucial for long-term planning.Variable Costs, however, directly depend on business activity and change with the production level. They increase as more is produced and decrease when production is reduced. Examples of variable costs include:Raw materialsEnergy costsWages for temporary staffAn important point is that variable costs ideally drop to zero when there is no production. This makes them particularly flexible, as they can adapt to the current business situation.Together, these two cost types – fixed and variable costs – form a company’s total costs. To get a complete picture of the company's financial position, it’s crucial to divide costs into these two categories.At this point, be sure to check out the profitability framework. Profit is calculated by subtracting total costs from revenue. To understand cost behavior, it’s essential to segment them into fixed and variable costs – a perfect exercise!You can find more frameworks in our Case Interview Basics. 🚀