The concept of capital



Contents

  • 1 Definition of capital
  • 2 Capital use
  • 3 types of capital
    • 3.1 Borrowed Capital
    • 3.2 Share capital
    • 3.3 Working capital
    • 3.4 Commercial capital
  • 4 References

Definition of capital

Capital is defined as wealth that comes in the form of assets or funds, and which expresses the financial strength of an individual, nation, or organization, and is assumed to be available for development and investment, while capital is defined in accounting as money invested in businesses to generate income, and is known In economics it is the factors of production used to produce goods and services. [1]

Capital use

Capital is used to generate and increase the revolution through investment. Examples of capital include automobiles, patents, software, and brands, where all these elements are inputs that can be used to create wealth as well as use in production, in addition to that Capital can be rented for a monthly or annual fee to create wealth, or it can be sold when it is no longer needed. [2]


Types of capital

Borrowed capital

This type of capital is used in business with the understanding that it must be paid on a predetermined date, in addition to that the interest that must be paid to the owner of the capital in exchange for the use of his money must be determined, and this interest is defined as the cost of renting the capital in order to expand the business, This type of capital is especially suitable for small companies, because it facilitates expansion and can be quickly understood by workers thanks to home ownership and the nature of community-based banks. [3]

Share capital

This type is known as net worth or book value, and it is the preferred type by most companies because they do not have to pay it, but it can be expensive because it requires a huge amount of work to develop their projects if they are funded in this way, and this type is also known as Share capital because it is invested in cash by shareholders and owners of a company that does not have any parallel obligations. [3]

Working capital

Working capital is defined as a measure of the company's short-term liquidity, which is the difference between the company's current assets and current liabilities, and it is also defined in particular as the company's ability to cover its debts, accounts payable and other obligations to be paid within a year. [2]

Commercial capital

This type of capital refers to the amount of money allocated for the purchase and sale of securities, and commercial capital differs from investment capital as it is preserved for risky projects, and is sometimes referred to as finance, and investors may try to achieve the best commercial capital by employing a variety of ways to improve Trade, so that these methods make the best use of capital by setting the optimum percentage of funds for investment . [2]

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