What Is Capital? Meaning, Features Together With Types Of Capital

What is Capital? Meaning

Different subjects similar Book-keeping, organisation of commerce (O.C) together with secretarial exercise (S.P) inwards commerce, economics, etc., holler for dissimilar pregnant of the term Capital.

In book-keeping, working capital missive of the alphabet way amount invested yesteryear human being of affairs inwards the business.

In commerce subjects similar O.C together with S.P, working capital missive of the alphabet way finance or company's capital.

But, inwards economics, working capital missive of the alphabet is that business office of wealth which is used for production.

But hither consider pregnant of term working capital missive of the alphabet from economical dot of view.

Relations of Capital

The give-and-take Capital is related amongst the next 3 terms, viz.,

1. Wealth,
2. Money, and
3. Income.

The relation of working capital missive of the alphabet amongst wealth, coin together with income is explained below:-

1. Relation amongst Wealth:-

Capital is that business office of wealth which is used for production. So, wealth is a wide concept together with working capital missive of the alphabet is a narrowed concept.

Relation of Capital together with Wealth is explained amongst the tending of next picture.

If a commodity is having features similar scarcity, utility, externality together with transferability, it becomes wealth. Influenza A virus subtype H5N1 motor automobile has all inwards a higher house features, together with thence it is a wealth. (As per motion painting 'A' inwards in a higher house photo). When wealth is used inwards production process, it becomes capital. If that automobile is used for taxi (cab) business, it becomes capital. (As per motion painting 'B' inwards in a higher house photo). Therefore, whatever commodity equally a wealth becomes the working capital missive of the alphabet if it is used for production.

Thus, all working capital missive of the alphabet is wealth exactly all wealth is non capital.

2. Relation amongst Money:-

The relation betwixt Capital together with Money is shown inwards the next picture.

Normally, working capital missive of the alphabet way investment of money inwards business. But inwards economic science coin becomes working capital missive of the alphabet alone when it is used to purchase existent working capital missive of the alphabet goods similar plant, machinery, etc. When coin is used to purchase working capital missive of the alphabet goods, it becomes Money Capital. Please regard the motion painting given above.

But coin inwards the hands of consumers to purchase consumer goods or coin hoarded doesn't constitute capital. Money yesteryear itself is non a element of production, exactly when it acquires stock of existent working capital missive of the alphabet goods, it becomes a element of production. For production nosotros require existent working capital missive of the alphabet together with coin working capital missive of the alphabet exactly coin working capital missive of the alphabet acquires existent capital.

3. Relation amongst Income:-

Capital generates income. So, working capital missive of the alphabet is a origin together with income is a result. E.g. fridge is a working capital missive of the alphabet for a ice-cream parlour owner. But, profits which he gets out of his delineate organisation is his income.

So, Capital is a FUND concept together with Income is a FLOW concept.

Features of Capital

The characteristics or features of working capital missive of the alphabet are:-

1. Man-made Factor : Capital is non a gift of nature. So it is non a top dog or natural factor, it is made yesteryear human being inwards working capital missive of the alphabet goods industry. It is secondary equally good equally an artificial element of production.
2. Productive Factor : Capital helps inwards increasing grade of productivity together with speed of production.
3. Elastic Supply : Supply of working capital missive of the alphabet depends upon working capital missive of the alphabet formation process. Capital formation depends upon savings together with investment. By accelerating working capital missive of the alphabet formation, working capital missive of the alphabet provide tin live increased. But it is a long term process.
4. Durable : Capital is non perishable similar labour. It has a long life dependent patch to periodical depreciation.
5. Easy Mobility : Movement of working capital missive of the alphabet from 1 house to to a greater extent than or less other is easily possible.
6. Is a Wealth : Since working capital missive of the alphabet has all features of wealth viz. utility, scarcity, transferability together with externality, working capital missive of the alphabet is a wealth exactly wealth doesn't necessarily move capital.
7. Derived demand : As a element of production, working capital missive of the alphabet has a derived need to create finished goods which accept a direct demand. e.g. need for raw cotton wool is derived from need for cotton wool cloth.
8. Round virtually production : Capital goods doesn't satisfy our wants directly. But resources should live diverted towards production of working capital missive of the alphabet goods first. And thereafter such produced hateful tin live used to create consumer goods having direct demand.
9. Social Cost : Resources accept option uses. Either they tin live set to production of working capital missive of the alphabet goods or consumer goods. When resources are used for producing working capital missive of the alphabet goods, it way gild has sacrificed enjoyment of consumer goods. This is called social cost.

Types of Capital

The forms, classification or types of working capital missive of the alphabet are:-

1. Fixed capital : It refers to durable working capital missive of the alphabet goods which are used inwards production 1 time again together with 1 time again till they article of apparel out. Machinery, tools, way of transport, manufacturing works life building, etc are fixed capital. Fixed working capital missive of the alphabet does non hateful fixed inwards location. Since the coin invested inwards such working capital missive of the alphabet goods is fixed for a long period, it is called Fixed Capital.
2. Working capital : Working working capital missive of the alphabet or variable working capital missive of the alphabet is referred to the unmarried utilization produced goods similar raw materials. They are used direct together with alone 1 time inwards production. They teach converted into finished goods. Money pass on them is fully recovered when goods made out of them are sold inwards the market.
3. Circulating capital : It is referred to the coin working capital missive of the alphabet used inwards purchasing raw materials. Usually the term working working capital missive of the alphabet together with circulating working capital missive of the alphabet are used synonymously.
4. Sunk capital : Capital goods which accept alone a specific utilization inwards producing a item commodity are called Sunk capital. E.g. Influenza A virus subtype H5N1 textile weaving machine tin live used alone inwards textile mill. It cannot live used elsewhere. It is sunk capital.
5. Floating capital : Capital goods which are capable of having to a greater extent than or less option uses are called floating capital. For e.g. electricity, fuel, carry vehicles, etc are the floating working capital missive of the alphabet which tin live used anywhere.
6. Money capital : Money working capital missive of the alphabet way the coin funds available amongst the venture for purchasing diverse types of working capital missive of the alphabet goods, raw stuff or for structure of manufacturing works life building, etc. it is also called liquid capital. At the commencement the coin working capital missive of the alphabet is required for 2 purposes 1 for acquiring fixed assets i.e. fixed working capital missive of the alphabet goods together with to a greater extent than or less other for purchasing raw materials, payment of reward together with coming together certainly electrical current expenses i.e. working capital.
7. Real capital : On the other hand, existent working capital missive of the alphabet is referred to the working capital missive of the alphabet goods other than coin such equally machinery, manufacturing works life buildings, semi-finished goods, raw materials, carry equipments, etc.
8. Private capital : All the physical assets (other than land), equally good equally investments, which select income to an private are called private capital.
9. Social capital : All the assets owned yesteryear a community equally a whole inwards the cast of non-commercial assets are called social working capital missive of the alphabet e.g. roads, populace parks, hospitals, etc.
10. National capital : Capital owned yesteryear the whole land is called national capital. It comprises private equally good equally populace capital. National working capital missive of the alphabet is that business office of national wealth which is employed inwards the reproduction of additional wealth.
11. International capital : Assets owned yesteryear international organizations similar UN, WTO, World Bank, etc., constitutes an International Capital.