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Maintenance capital expenditure

The portion of capital spending needed just to keep current capacity and capability intact, as opposed to the portion funding expansion.

Only growth capex is discretionary. A company can cut it in a downturn; cutting maintenance capex just moves the bill into the future. Separating the two is the difference between a genuine free-cash-flow estimate and a flattering one.

Companies almost never disclose the split, so analysts estimate it, most simply by using depreciation-accounting as the proxy, or by scaling historical capex per unit of capacity.

Example: Northwind Tools does not disclose a split. Using depreciation of $64M as maintenance, owner earnings are $164M of operating cash flow less $64M, or $100M, against reported free cash flow of $89M.

Related: capex, free-cash-flow, unlevered-free-cash-flow, discounted-cash-flow

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