Maintenance vs growth capex
Maintenance capital spending sustains existing operating capability; growth spending expands or improves future capacity. Projects may serve both purposes, so the split requires judgment.
Related variants Capex, Capital expenditure
Maintenance vs growth capex in round numbers
Hypothetical annual spending, in US$ millions: 2 of maintenance capex plus 1 of growth capex equals 3 of total capex in the same year. Actual free cash flow generally deducts all 3. A separately labeled maintenance-only owner-earnings estimate deducts 2 from a stated pre-capex starting measure, excluding the 1 of discretionary growth spending. Depreciation and amortization do not establish this cash-spending split.
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| Item or measure | Treatment |
|---|---|
| Maintenance capex | 2; sustains existing capability |
| Growth capex | 1; expands future capacity |
| Actual free cash flow | Deduct total capex of 3 |
| Maintenance-only estimate | Deduct 2 from a pre-capex starting measure |
Terms Related to Maintenance vs growth capex
Owner earnings · Quality of earnings (QofE) · EBITDA add-backs · Asset turnover · Deferred capex · All of the glossary