What is capital?
Capital is an expression that covers both the financial assets of a business and the value of its fixed investments in machinery, buildings and other facilities but not the value of any materials to be used in the creation of products.
Where have you heard about capital?
Company reports and financial media refer to 'capital equipment' and to capital-raising share and bond issues by companies. Anyone with an interest in economics will have learned that the four factors of production are land, labour, enterprise and capital.
What you need to know about capital...
All businesses need capital, but the amount they require varies enormously. Service businesses such as advertising agencies or office-cleaning firms will need modest capital outlays in terms of cash, equipment and premises by comparison with a car manufacturer or steel producer. Capital can be acquired by selling shares in the business, or equity, by borrowing from a bank or other lender, known as debt, or in the case of smaller businesses by the founder having foregone spending in the past in order to build up enough capital to launch the company.