The term "capital" has no unambiguous interpretation. Ever since the days of political economy, scientists have tried to give it a general definition, but until now they have not been able to do this. For some economists, capital is wealth, a stock of manufactured goods. For others, capital is the means of production that are used in the manufacture of goods and services.
Instructions
Step 1
In classical economics, capital is a factor of production along with the other two - land and labor. In other words, these are resources that can be used to produce goods and provide services. In modern economics, a distinction is made between physical, natural and human capital. With this approach, any means of labor is physical (production) capital. However, a means of labor can only become capital if its owner attracts labor.
Step 2
Capital is divided into fixed and circulating capital. Fixed capital transfers its value to the price of the commodity in parts over a long period of time. Fixed capital is reflected in accounting as fixed assets, i.e. means of labor that are repeatedly involved in the production process. Their useful life exceeds 1 year. Fixed capital includes buildings, structures, equipment, inventory, production machines, etc.
Step 3
Working capital is characterized by a short service life (less than 1 year) and participation in one production cycle, i.e. he transfers his value to finished products in full. Working capital includes raw materials, supplies, goods, cash and other elements.
Step 4
There are also other types of capital. Physical, or real, capital - funds invested in a business, a source of profit in the form of means of production: machinery, equipment, raw materials and materials, finished products used to manufacture goods and provide services.
Step 5
To acquire physical capital, you need money capital. It should be noted that with this interpretation, money is not directly capital, since the possession of them does not bring profit. They become capital only when they are channeled into the acquisition of physical capital.
Step 6
Financial capital is a source of funds for a firm, obtained through financial instruments (securities and long-term loans), as well as through income-generating activities (retained earnings). At the same time, equity capital is allocated, i.e. funds belonging to the owners of the enterprise, and borrowed capital - funds of its creditors.
