Capital includes
financial assets, as well as the machinery and equipment businesses use in
production. Investors use capital to buy stocks or mutual funds. Companies
raise capital by selling bonds or stocks to finance their operations.
While capital
can be currency or cash, it’s not the same thing as money. People use money to
buy goods and services for consumption. Capital is more durable, and it creates
wealth through investment. Land, cars, patents, software and brand names are
all capital. They can be rented out or used to make products, all in an effort
to create wealth. Investing capital instead of spending it as money often
builds more capital.
Property rights
give capital its value, allowing its owners to use it as they want. Since
capital generates income, those investors, companies and societies who have the
most capital are better off. How a person, firm or country chooses to allocate
their capital goes a long way toward determining their level of prosperity.
24 comments:
Capital plays a very important role in economy of any country. Capital has ability to secure country’s future; if a country will not have capital it will become dependent. Capital is very important in growth of a country. capital increases productivity of a country which in turn increases its GDP. Thus, we can say capital is the difference between developed and developing country. Investment in research, technology, and education all comes under capital and because India lags behind in these investments, it is a dependent and a developing country whereas countries like U.S. has more capital due to which it is a developed country. So for a healthy economy role of capital is indispensable.
Capital refers to financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. It also includes money invested in a business to generate income.
In general terms, capital is wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization or a nation and assumed to be available for investment or development.
In terms of accounting, it is money invested in a business to generate income.
In terms of economics, it is factors of production that are used to create goods or services and area not then themselves in the process.
Capital in basic language can be said as something which can produce means of production, which can secure future, increases growth, i.e. GDP and can be used for development of socio-economic structure.
Fundamentally, capital is any product that is produced and has the ability to enhance the power of an individual to perform economically useful work. Moreover Capital is directly impacted by both interest and profit.
Capital market is a market where buyers and sellers engage in exchange of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as people and institutions.
However, in different contexts, the term can have a variety of other meanings.
1)Capital can refer to funds raised to support a particular business or project.
2)Capital can also represent the accumulated wealth of a business, represented by its assets less liabilities.
3)Capital can also mean stock or ownership in a company.
Referring to 2nd point-wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists.
Devansh Dubey
16bal073
Capital may be defined as financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities.
Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify.
Good investment always create capital while bad investment create only money.
Three important things About capital are:
1) it secures future.
2) it help in growth.
3) it gives development.
The term Capital is used to refer to the financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify as capital.
-Richa Mukherjee
16bal043
The term Capital is used to refer to the financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify as capital.
-Richa Mukherjee
16bal043
Capital is an important source of income for any individual,organisational and country. Capital may be defined as financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities.
Different types of capital are required like cede capital , venture capital , bridge capital, venture capital, expansionary capital and start up Capital. Each capital is an important for the organisation to be efficient and helps in earning profit which ultimately leads accumulation of wealth by making investment into various fields like stock market , buying a residential house etc.
Well Done, Naman, Payas, Nikita, Richa, Rajeev, Devansh, Varun and Nakul...We will continue the discussion and learn together.
Keep Up the Good Work!
Arun.
Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.Capital is the money or wealth needed to produce goods and services. In the most basic terms, it is money.All businesses must have capital in order to purchase assets and maintain their operations.Examples of capital include automobiles, patents, software and brand names. All of these items are inputs that can be used to create wealth. Besides being used in production, capital can be rented out for a monthly or annual fee to create wealth, or it can be sold when it is no longer required.
In economic terms, capital (also referred to as capital goods, real capital, or capital assets) references non-financial assets used in the production of goods and services. Capital is important because it is a significant factor in the creation of wealth. we should also note that capital goods are used in the production process and may depreciate through accounting practice to incorporate utilization, though they are not consumed. It is possible for capital goods to be maintained or regenerated depending on the type of capital.
This short note on capital, however, sums up entire definition of capital. I’ll try to give in a new comment as how is capital important in banking. “Capital” is one of the most important concepts in banking. Banks hold capital for:
1.If a bank is forced to close, capital can be used to pay off unpaid debts.
2.Holding capital encourages banks to undertake less risk than they might under other circumstances, since capital is at risk in case of failure.
3.Government asks them to do so.
4.Because banks know more about the soundness of their operations than investors (what economists call information asymmetry), the decision to hold more capital and to subject owners to a greater loss in case of failure signals to depositors and potential investors that the bank will not undertake too much risk.
In its simplest form, capital represents the portion of a bank’s assets which have no associated contractual commitment for repayment. It is, therefore, available as a cushion in case the value of the bank’s assets declines or its liabilities rise.
ANANT GAUTAM(16BAL067)
According to the class discussion, a financial market is divided into 2 parts namely money market and capital market. Where money market is related to short-termed loans between financial institutions and banks, capital markets are the markets where securities are issued to raise medium and long-termed loans. Here, in case of a capital market, capital refers to 'produced means of production'. Unlike currency or cash, a capital hs the ability to utilize resources. And at the same time, it also secures future, makes a company less dependable which further adds to its growth and development. That is why- Good investments create capital and not money.
Secured and Unsecured Promissory Notes
Promissory notes can be unsecured or secured by collateral, which is normally the asset that is purchased using the loaned money. Banks and other financial institutions will require property to be used as collateral to secure the note whereas an individual loaning money to a family member may choose to forego the use of collateral. The same can be said for interest to be charged on the debt.
Capital refers to financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify. Capital plays an imperative part in wealth creation. It likewise helps in securing future and development too.
Generally speaking, the term ‘capital’ refers to any financial resources or assets owned by a business that are useful in furthering development and generating income.
However, in different contexts, the term can have a variety of other meanings.
Here are a few:
Capital can refer to funds raised to support a particular business or project.
Capital can also represent the accumulated wealth of a business, represented by its assets less liabilities.
Capital can also mean stock or ownership in a company.
How it differs from money
While it may seem that the term capital is almost the same as money, there is an important difference between the two. Money is used for the purchase and sale of goods or services within a company or between two companies or individuals and therefore has a more immediate purpose.
Capital, however, also includes assets such as investments, stocks, and other assets that are more long-term and could benefit the company in the future. Capital involves the aspects of a company that help build and improve it, that form its base for generating revenue.
The term capital is used in economics in various senses. In ordinary language and sometimes in economics also capital is used in the sense of money.The money which is available for investment and productive purposes has been called money capital or financial capital by some economists.
Capital has been rightly defined as “produced means of production”. This definition distinguishes capital from both land and labour because both land and labour are not produced factors. Land and labour are often considered as primary or original factors of production. But capital is not a primary or original factor; it is a produced factor of production. Capital has been produced by man by working with nature. Therefore, capital may well be defined as man-made instrument of production.
The term CAPITAL refers to the accumulated assets of a business that can be used to generate income for the business. It includes all the goods that are produced by human beings and are used for producing goods or services.
It is more durable as well as can be used to generate wealth through investment.
For Example:- Cars, patents and also brand names which can be used to generate wealth. All of these items are inputs that can be used to create wealth.
If a person purchases a house and gives it on rent, then he is generating wealth by investing in that house.
Capital plays an indispensable role in economy of any country. Capital generally refers to financial resources. Investment in research, technology, and education all comes under capital and because India lags behind in these investments, it is a dependent and a developing country whereas countries like U.S. has more capital due to which it is a developed country.
While it may seem that the term capital is almost the same as money, there is an important difference between the two. Money is used for the purchase and sale of goods or services and capital creates wealth through investment. It likewise helps in securing future and development too. So, if India has to grow and develop it has to focus more on the investment in capital.
Capital plays a crucial role in the financial development of any organisation, industry or a country .Capital may be defined as financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities.
Investment by a country on research, education, agriculture etc all this can be considered as capital. A country like U.S.A which invests abundantly in all these sectors is found to be independent as compared to a country like India which is yet to realise the importance of investment. Different types of capital are required like cede capital , venture capital , bridge capital, venture capital, expansionary capital and start up Capital. Each of them plays an important role in helping a company in attaining profits.
Capital has a number of related meanings in economics, finance and accounting. In finance and accounting, capital generally refers to financial wealth, especially that used to start or maintain a business. In classical economics, capital is one of the three factors of production, the others being land and labor.
In a fundamental sense, capital consists of any produced thing that can enhance a person's power to perform economically useful work—a stone or an arrow is capital for a caveman who can use it as a hunting instrument, and roads are capital for inhabitants of a city. Capital is an input in the production function. Homes and personal autos are not usually defined as capital but as durable goods because they are not used in a production of saleable goods and services.
Detailed classifications of capital that have been used in various theoretical or applied uses generally respect the following division:
Financial capital, which represents obligations, and is liquidated as money for trade, and owned by legal entities. It is in the form of capital assets, traded in financial markets. Its market value is not based on the historical accumulation of money invested but on the perception by the market of its expected revenues and of the risk entailed.
Natural capital, which is inherent in ecologies and which increases the supply of human wealth, e.g. trees.
Social capital, which in private enterprise is partly captured as goodwill or brand value, but is a more general concept of inter-relationships between human beings having money-like value that motivates actions in a similar fashion to paid compensation.
Instructional capital, defined originally in academia as that aspect of teaching and knowledge transfer that is not inherent in individuals or social relationships but transferrable. Various theories use names like knowledge or intellectual capital to describe similar concepts but these are not strictly defined as in the academic definition and have no widely agreed accounting treatment.
Human capital, a broad term that generally includes social, instructional and individual human talent in combination. It is used in technical economics to define balanced growth which is the goal of improving human capital as much as economic capital.
The characteristics or features of capital are:-
Man-made Factor : Capital is not a gift of nature. So it is not a primary or natural factor, it is made by man in capital goods industry. It is secondary as well as an artificial factor of production.
Productive Factor : Capital helps in increasing level of productivity and speed of production.
Elastic Supply : Supply of capital depends upon capital formation process. Capital formation depends upon savings and investment. By accelerating capital formation, capital supply can be increased. But it is a long term process.
Durable : Capital is not perishable like labour. It has a long life subject to periodical depreciation.
Easy Mobility : Movement of capital from one place to another is easily possible.
Is a Wealth : Since capital has all features of wealth viz. utility, scarcity, transferability and externality, capital is a wealth but wealth doesn't necessarily become capital.
Derived demand : As a factor of production, capital has a derived demand to produce finished goods which have a direct demand. e.g. demand for raw cotton is derived from demand for cotton cloth.
Round about production : Capital goods doesn't satisfy our wants directly. But resources should be diverted towards production of capital goods first. And thereafter such produced mean can be used to produce consumer goods having direct demand.
Social Cost : Resources have alternative uses. Either they can be put to production of capital goods or consumer goods. When resources are used for producing capital goods, it means society has sacrificed enjoyment of consumer goods. This is called social cost
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