The one-time, fixed expense of setting up and conducting business, after which only recurring operational costs are assessed.
Capital cost comes into play when purchasing depreciable items like buildings, furniture and equipment which are used to make a business or project commercially operable. However, these items cannot be deducted up front when calculating net income for tax purposes.
A new machine that increases production and lasts for years is also considered a capital cost.
Unlike operating costs, capital costs may be spread out over many years in financial reports and tax returns. In insurance, they’re the initial cost of insuring you, after which your insurance company can begin making a profit.