What can be a reason for a company to engage in capital expenditure?

Engaging in capital expenditure often revolves around acquiring or upgrading physical assets, which is fundamental to a company's long-term growth strategy. Companies invest in capital expenditures when they need to purchase new equipment, buildings, or technology that will enhance their operational capacity or improve production efficiency. Such investments are crucial for maintaining competitiveness in the market, as they can lead to increased productivity and potential revenue growth.

By acquiring or upgrading these assets, a company may also reduce maintenance costs over time, ensure compliance with newer regulatory requirements, or take advantage of technological advancements that can improve overall operations. This strategic approach enables businesses to position themselves favorably for future opportunities and demands.

In contrast, improving cash flow liquidity, reducing operational overheads, and paying off existing debts involve different financial strategies that do not typically fall under the category of capital expenditures. While those strategies are important for overall financial health, they do not directly relate to the investment in physical assets that capital expenditure entails.