Net Capital Expenditures

Net Capital Expenditures is functionally the same thing as your Investment in Operating Working Capital, only referring to capital (long-term) rather than current operating assets.

In order to maximize their sales, capital-intensive companies have to constantly invest into upgrading or replacing their existing equipment. Net Capital Expenditures is exactly the amount of such investment over the time period. Net of accumulated depreciation, of course.

Therefore, your fundamental objective in managing your Net Capital Expenditures (NCE) is exactly the same as in managing your OWC. It is to optimize the latter to maximize the difference between your Gross Cash Flow and your NCE. Which, as usual, will require (1) solid methodology; (2) efficient business process; (3) efficient tools and (4) highly experienced and competent personnel.

    

Companies that are not capital intensive, usually do not have to worry about this item. 

Investment in Capitalized Operating Leases (or, more accurately, ‘in Capital Leases’) is functionally identical to Net Capital Expenditures, only structured as a capital lease and not a purchase. Therefore, it must be analyzed and managed in exactly the same way.

Investments in Intangibles and Goodwill is also functionally identical to Net Capital Expenditures, only it covers intangible, rather than tangible, operating assets. Therefore, it must be analyzed and managed in exactly the same way.