Wednesday, 19 December 2012

Meaning of Capital


Capital can be defined as excess of assets over liabilities.Again, capital can be divided into two parts- one is insider capital & another is outside capital.By insider capital, we mean money invested by owner of the entity. However, outside capital means money raised from outsiders in the more of debt, preference shares etc.


Capital is defined differently under different heads such as-

In plain Businessmen terms-
"Amount invested by businessmen in business”.If the same amount is used for personal use, it is called money but for business use it is termed as capital.

In Economic terms,
"Capital is a part of  factors of production that are used to generate goods or services.”Factors of Production includes four factors- Land,Labor,Capital & Enterprise popularly known as 4 Ms,”Management, Machines,Material  & Money.

In Financial terms-
"Amount used by business entities to finance its assets, day to day operations,expansions,on going & future projects & other activities."


Capital can be of different types such as-

  • International Capital
  • National Capital
  • Private Capital
  • Social Capital
  • Real Capital
  • Money Capital
  • Floating Capital
  • Fixed Capital
  • Working Capital
  • Sunk Capital




No comments:

Post a Comment