Capital is a term used for the financial assets possessed by a person. Capital is one of the most important areas of study in economics. Capital is distinguished from money in a way that capital is used for making wealth and money is used for purchasing goods and services. So, capital could be anything that gives you a large output and profit. For example, the ability of a person to invest in a business. Capital gives you an ongoing process of producing output through businesses. Capital is one of the crucial agendas in the study of the economy and its growth.
Further, Capital is composed of four elements: Debt capital, equity capital, working capital, trading capital.
Debt capital can be used as the capital by borrowing loans from any financial private institution to further use it the process of investment. Almost all the businesses today run on debt capital. It needs to be repaid to the financial institution with an applied interest rate.
Equity capital is also a form of capital but it doesn’t need to be repaid like debt capital. Business owners do investment by using the sale of stock.
Working Capital is achieved by the difference between a company’s current assets and current liabilities which also determines the financial health of a company.
Trading capital is the amount of money spent on buying and selling of different securities. It is also called a bankroll.
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