Definition of capital

Definition of capital

Definition of capital

Capital is the wealth that form a kind of asset, and is used to refer to private enterprises financial strength or individuals, [1] defines capital that is the money used in the manufacture of more wealth , or start a new project. [2] Other definitions of capital are money or other property owned by individuals or enterprises, capital is used to establish an enterprise or a company, or to invest in a variety of fields. [3]

Capital characteristics Capital is characterized by a set of characteristics, the following information about the most important: [4]

• Capital is a product of human labor; it is a type of capital , such as buildings, machinery, and other human production. Capital is one of the negative factors of production.

• Capital can not produce any production except with auxiliary activities. For example, to create a building, there must be workers who are able to build, so capital can not produce anything on its own.
  

• Capital is a variable instrument; the value of the total supply of equipment can not be changed, but the value of capital supply can be changed in terms of increase or decrease.

• Capital is affected by impairment; its continued depreciation reduces its value.

• Capital is part of the stock of labor; capital is used by their owners to earn wealth, capital is accumulated as a result of savings , and part of it is spent on consumer products, while the rest is preserved.

• Capital is accepted for destruction; all capital products can be destroyed because of their permanent use, such as the end of life of the machinery and vehicles used in the company .
  

Types of capital

The capital is divided into a group of species, namely: [5]

• Debt Capital: is the capital that business gets; by relying on debt from private sources such as insurance companies and financial institutions, or public sources such as loans .

• Capital stock ( in English: Equity Capital): is the capital , which depends on financial investments that do not need to pay off, these investments include provided by employers, and contributions for the sale of the contents of the inventory.

• Working Capital: is the difference between current assets of the institution and current liabilities. This capital is used as a measure of the liquidity of short-term companies, ie, the companies that cover their debt and other obligations due during the year.

• Trading Capital: Capital is the capital used to refer to a sum of money allocated to the buying and selling of a variety of securities. It differs from venture capital because it is reserved for the most anticipated projects and is sometimes referred to as the commercial capital called financing .

• Additional Paid-In Capital: An account in the equity section of the entity's balance sheet , representing the additional amount paid for the company's shares according to their nominal value, and this type of capital only appears When an individual buys shares directly from the establishment.

Capital functions

Capital contributes to the provision of many functions useful for various establishments, the most important of these functions: [6]

• Supply of raw materials: It is the role of capital by providing supplies for raw materials. Every business sector must have sufficient quantity of raw materials, which are characterized by good quality.

• Supply of machinery and equipment: Capital contributes to the provision of equipment and tools suitable for the production process. •

• Provide subsistence: by providing workers with means of living during the implementation of the process of production, such as the provision of clothing for work , meals, and other things necessary.

• Provision of means of transportation : for the benefit of customers such as trucks, railways.

• Attracting workers and employees: Capital contributes to providing employment opportunities for employees and employees. This capital function is one of the most important jobs in most sectors of the economy, both developing and developed, and may be determinants of employment in a particular country.

The importance of capital

The head of capital of the important components of the facilities; because of its vital role in the production system , which enhances the importance of summarizing according to the following points: [6]

• Contribution to the provision of production bases: It is necessary to have capital to support production. It is difficult for any establishment to apply production without capital. Materials and products can only be supplied through the use of machinery and tools.

• Support for increased productivity: As technological development has increased, capital has become a means of producing many commodities; high productivity has been associated with the continuous use of capital.

• Participation of economic development : is the importance attached to the strategic role of capital; where he owns a central position within the economic development; it is the accumulation of capital to the private development sector essence of the economy , which contains many of the capital, such as dams, factories, bridges, ports, and irrigation works , And others.

References

1 ↑ "capital" , Business Dictionary , Retrieved 17-5-2017. Edited.
2 ↑ "capital noun (MONEY)" , Cambridge Dictionary , Retrieved 17-5-2017. Edited.
3 ↑ "capital" , Oxford Dictionaries , Retrieved 17-5-2017. Edited.
4 ↑ Smriti Chand, "Capital: Meaning and Characteristics of Capital | Accounting" , Your Article Library , Retrieved 17-5-2017. Edited.
5 ↑ "capital" , Investopedia , Retrieved 17-5-2017. Edited.
6 ^ A b Tushar Seth 's , "Capital: Meaning, Characteristics, Function And Importance Of Capital" , : Economics Discussion The , Retrieved 18-5-2017. Edited.

By: Heba Saeed