Capex vs Opex Decision
Weighs cash timing and flexibility, which usually dominate the accounting treatment people focus on.
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Running it, start to finish
- Compare cash out by year before comparing totals.
- Judge useful life honestly, and let uncertainty favour flexibility.
- Confirm the accounting and tax treatment with a qualified accountant.
What you get back
The output this produces, every time.
- Compares cash out by year, which usually decides it for a small company.
- Prices the flexibility of the reversible option, which a total-cost comparison ignores entirely.
- Separates the operational case from the accounting one, so a metric does not drive a cash decision.
Getting better results
Where this usually goes wrong, and how to avoid it.
- Be honest about useful life. Buying for a five-year life and replacing in two is the standard error, particularly with technology.
- Do not optimise for the metric. Structuring a decision to flatter the profit line while worsening cash is a real and expensive mistake.
- Confirm the treatment with an accountant. Capitalisation and tax rules vary by jurisdiction and circumstance, and getting it wrong is corrected retrospectively.
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Written for The AI University. Every prompt in this library is original work — authored, tested and revised here, not collected from elsewhere. 365 of them, free with an account.