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Capital expenditures include acquiring fixed assets , preparing an asset to be used in business, restoring property so that value is added, or adapting it to a new or different use. Operating expenditures on the other hand include license fees, maintenance and repairs, publicity, office expenses, supplies, legal fees, utilities such as telephone, insurance charges, property taxes, travel and vehicle expenses, leasing commissions, salary and wages, raw materials...etc
From an income tax perspectives, businesses typically prefer OpEx to CapEx. For example, rather than to buy assets outright for apiece, a business may prefer to lease it from a vendor for a period of time. This is because buying equipment is a capital expense. So even though the company pays in full for the equipment, it can only deduct a portion of the spent amount as an expense in the accounting year.
On the other hand, the entire amount of lease paid to the lessor/vendor for lease is operating expense because it was incurred as part of the day-to-day business operations. The company can, therefore, rightfully deduct the cash it spent that year.
The advantage of being able to deduct expenses is that it reduces income tax, which is levied on the net income. Another advantage is the balance money is available for business and apart from cash flow saving, in taxes this year is better than saving a better % in taxes in the coming year.
However, tax may not be the only consideration. If a public company wants to boost its earnings and book value, it may opt to make a capital expense and only deduct a small portion of it as an expense. This will result in a higher value of assets on its Profit and Loss account and in the yearly balance sheet. This will show a higher net income/ higher profit in the company balance sheet presented to investors.
