Agenda

Difference between CAPEX/OPEX:

What's the difference between CAPEX and OPEX?
A buddy of mine was asking me how CAPEX really differs from OPEX. So I put this together for him. Please feel free to post a reply if I'm wrong about anything! CAPEX CAPEX is investment in the business. It adds shareholder value. But this new additional shareholder value is almost entirely created by the CASH FLOW created by the investment, not really the physical assets you buy, although there could be an element of this. This cash flow is why you invest in the first place and in the vast majority of cases is the prime component of the shareholder value that is added (ie stock price goes up). Assets depreciate so that value eventually disappears. What is left over is the cash flow. Put another way, CAPEX is the money you stump up today in the hopes of getting a nice stream of cash later on. Physical assets are merely a means to an end. Capital gains do play a part in it as well but let's keep it simple for now. This is why telecoms companies who invested billions in networks are being sold off for mere millions. The assets are in the ground, and while not 100% depreciated, they will be eventually. Thus, the physical assets are for all intents and purposes worthless. What is valuable is the cash flow you can generate with those assets but this is plummeting daily because of the fall in bandwidth prices, hence the relatively small enterprise values we're seeing. CAPEX can be externally financed. Collateral for debt financing can be anything you and the lender agree on. Anything. But all they care about is interest payments and getting their money back in the end. Equity investors are different - they're greedy. They want it all. If financing with equity, then you are in essence promising the entire future cash flow of the project to your investors. OPEX OPEX is COGS, SG&A and R&D. It's what you have to spend in order to keep your business running. OPEX is deducted from your revenue to get operating profit. Put another way, OPEX is a measure of the (in) efficiency of your business. It has a direct correlation with enterprise value. You reduce OPEX (without hurting your core business), and you increase enterprise value. Lay off a bunch of people, and your stock price goes up. More on the accounting of OPEX/CAPEX: After all of your operating expenses (COGS, SG&A, R&D) are deducted from revenue you are left with operating profit, aka EBITDA. This number is the most basic measure of the health of the business. If you can't make money by selling your products then it shows up here. And warning lights should be going off in investor's heads. It is from this pile of money that CAPEX is drawn from amongst other things like tax, interest to service debt, and anything left over is put in the bank or returned to shareholders. This is a very simplistic view but is more or less how it works. EBITDA is also where cash flow and accounting profit/loss (aka earnings, EPS, net profit - all the same thing) diverge. I won't go into it here, but cash flow does have a direct bearing on how CAPEX is allocated in many cases.

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Replies: 5 - Pages: 1 - Last Post: Apr 10, 2011 5:39 PM Last Post By: KTP RAO K T P R A O Purchase Account Management - Accounting doc not generated Posted: Apr 9, 2011 8:42 AM Dear Experts

We are actived Purhcase Account Management and necessary accounts are assigned in OBYC. But at the time of GRN posting the p Posts: 80 purchase offsetting accounts are not generated. Only Inventory account and Supplier GRIR account only generated. Registered: 8/19/09 Forum Points: 0 the purhcase Account and Purhcase offsettings are not geneated?. I have checked the settings and found correct. Why Please suggest and clarify this functionality works for particular PR/POs or is there any additinal settings are missed ? Kindly revert. Thanks in advance Rao S Re: Purchase Account Management - Accounting doc not generated

a Posted: Apr 9, 2011 11:54 AM in response to: KTP RAO n Usually EIN and EKG should get hit for the basic price. Have you assigned GL in OBYC to keys EIN anmd EKG g e e Regards t Sangeeta a Edited by: Sangeeta Khurana on Apr 9, 2011 3:26 PM K h u r a n a

Posts: 182 Registered: 6/6/08 Forum Points: 354

Re: Purchase Account Management Accounting doc not generated R A Posted: Apr O 10, 2011 10:04 in Posts:AM 80 response Registered: 8/19/09 Forumto: Sangeeta Points: 0 Khurana K T P HI Sangeetha Thanks for quick support, I have already assigned GL accounts in OBYC.

But I have observed Purchase Account and Purchase offsetting account line items are generating at GRN posting, only for Capex Procurements. Account assignment category Q and P) .For Opex procuments ( PR/PO is created withAccount assignment category 'K') the purchase account an items are not getting generated.

Can you please let me know this Purchase Account Management functinality is relevant for Capex procument cases only or both procuments. Be (purchase a/c and purchase offsettings ) are not getting generated for Openx cases. Please reverst with your suggestion. Thanks & Regards Rao S a n g e e t a Re: Purchase Account Management Accounting doc not generated Posted: Apr 10, 2011

12:22 K PM in response h u to: KTP RAO r The purchase account is generally not posted upon goods receipts for purchase orders with account assignment. Since you are using account assi a center is it not posting into the purchaser account. If you use P or Q its posting coz it goes as valuated special stock. If you are doing goods recei n assignment where in the goods is not going to come as a stock but gets consumed like using cost center in your case the purchase account functio a This is not meant for capital goods only. If you are doing goods receipt without account assginment it will generate entry. Regards Sangeeta Posts: 182 Registered: 6/6/08 Forum Points: 354

R a f a e l

Z a r a g a Hi Rao, t z I am not sure if it helps - just an idea. The legislation in different countries is different when it comes to the purchasing accout mgmt. Some requ k posted to the purchasing acct is the same as the stock posting. Others require that the amount is the same as the purchasing price (i.e. GR/IR acct y There is a switch in IMG to choose one of these methods: MM -> Valuation -> Account Determination -> Without Wizard -> Purchase Account Calculation of Value for Purchase Account (column "Recpt value"). Try setting this flag - maybe it will give you the posting, since the GR/IR acct is involved in GR to cost ctr too. Posts: 490 Registered: 1/30/09 BR Raf

Re: Purchase Account Management Accounting doc not generated Posted: Apr 10, 2011 2:55 PM in response to: KTP RAO

Re: Purchase Account Management - Accounting doc not generated K T Posted: Apr 10, 2011 5:39 PM in response to: Sangeeta Khurana P Hi Sangeetha RThanks for your quick and valuable support. Now I understood the functionality. A O Posts: 80 Registered: 8/19/09 Forum Points: 0

The logic to get the BOM data from SAP tables is as follows : 1. Search Material, Plant and Material Description. Read the material number, plant and material description from join of MARA, MARC and MAKT using the following conditions: Material Number (MARA-MATNR) in input material (select-options) and Plant (MARC-WERKS) in input plant (select-options) and Material type (MARA-MTART) in input material type (select-options). Note: Proceeding to Step 2 or 3 or 4 depends on the input radio button for Production or Engineering or ALL BOM option. 2. Search for BOM Engineering. BOM link search from MAST Select material numbers and BOM link from MAST based on the material numbers selected above using the following conditions: Material (MAST-MATNR) = Materials selected above and Plant (MAST WERKS) = As in input and BOM usage (MAST-STLAN) = 2 (Engineering usage). Read BOM Header and Item. Read BOM Header details as per data mapping (Section 5.2) from table STKO using the conditions: BOM Number (STKO-STLNR) = BOM number got in previous step and BOM alternative (STKO-STLAL) = BOM alternative got in previous step. Read Item details as per data mapping from STOP using the conditions : BOM number (STOP-STLNR) = STKO-STNLR. Read BOM text from table STZU. 3. Search BOM Production. BOM link search from MAST Select material numbers and BOM link from MAST based on the material numbers selected above using the following conditions: Material (MAST-MATNR) = Materials selected above and Plant (MAST WERKS) = As in input and BOM usage (MAST-STLAN) = 1 (Production usage). Read BOM Header and Item. Read BOM Header details as per data mapping (Section 5.2) from table STKO using the conditions: BOM Number (STKO-STLNR) = BOM number got in previous step and BOM alternative (STKO-STLAL) = BOM alternative got in previous step. Read Item details as per data mapping (Section 5.2) from table STOP using the conditions: BOM number (STOP-STLNR) = STKO-STNLR. Read BOM text from table STZU.

Search for Resource / Production Version (Production BOM s only) Read Production Version and Resource as per data mapping (Section 5.2) from table MKAL using the conditions: Material number (MKAL MATNR) = Material number from above selection (MAST) And Plant (MKAL WERKS) = Plant from above selection (MAST) And Alternative BOM (MKAL-STLAL) = Alternative BOM from above selection (MAST) And BOM Usage (MKAL-STLAN) = 1 (Production BOM). Note: 1. If no production version exists for any of the BOM s write such records at the bottom of the report under the heading No Production Version Exists (Production BOM s) . 2. Sort the output on Plant, Usage and then on Material. 3. If multiple plants then the report will be displayed Plant wise. Header to be displayed for Production / Engineering BOM option. 4. Material BOM Comparison. Search for BOM s BOM link search from MAST Select material numbers and BOM link from MAST based on the material numbers selected above using the following conditions: Material (MAST-MATNR) = Materials selected above and Plant (MAST WERKS) = As in input. Read BOM Header s Read BOM Header details as per data mapping (Section 5.2) from table STKO using the conditions: BOM Number (STKO-STLNR) = BOM number got in previous step and BOM alternative (STKO-STLAL) = BOM alternative got in previous step. Read Item details as per data mapping from STPO using the conditions: BOM number (STPO-STLNR) = STKO-STNLR.