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

Thanks!

Thanks!

1 answer

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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).Difference variable fixed costs

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).Difference variable fixed costs

Related BootCamp article(s)

Economies of Scale and Scope

Use the concept of economies of scale and economies of scope to uncover potential areas for growth and profitability improvement in your consulting Case Interview

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Costs are segmented into fixed and variable costs, since these differ significantly with respect to dependency on activity and time-wise adaptability.

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