What is Capital? Meaning
Different subjects similar Book-keeping, organisation of blogspot.com//search?q=what-is-commerce-meaning-and-importance">commerce (O.C) together with secretarial exercise (S.P) inwards commerce, economics, etc., betoken dissimilar pregnant of the term Capital.
blogspot.com//search?q=what-is-commerce-meaning-and-importance">business.
In commerce subjects similar O.C together with S.P, majuscule agency finance or company's capital.
But, inwards economics, majuscule is that business office of wealth which is used for production.
But hither consider pregnant of term majuscule from economical dot of view.
Relations of Capital
The give-and-take Capital is related amongst the next 3 terms, viz.,
- Wealth,
- Money, and
- Income.
The relation of majuscule 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 majuscule is a narrowed concept.
Relation of Capital together with Wealth is explained amongst the assist of next picture.
blogspot.com//search?q=what-is-commerce-meaning-and-importance">investment of blogspot.com//search?q=what-is-commerce-meaning-and-importance">money inwards business. But inwards economic science coin becomes majuscule alone when it is used to purchase existent majuscule goods similar plant, machinery, etc. When coin is used to purchase majuscule goods, it becomes Money Capital. Please regard the moving-picture exhibit given above.
But coin inwards the hands of consumers to purchase consumer goods or coin hoarded doesn't constitute capital. Money past times itself is non a component of production, exactly when it acquires stock of existent majuscule goods, it becomes a component of production. For production nosotros require existent majuscule together with coin majuscule exactly coin majuscule acquires existent capital.
3. Relation amongst Income:-
Capital generates income. So, majuscule is a beginning together with income is a result. E.g. fridge is a majuscule for a ice-cream parlour owner. But, profits which he gets out of his trace concern is his income.
So, Capital is a FUND concept together with Income is a FLOW concept.
Features of Capital
The characteristics or features of majuscule are:-
- Man-made Factor : Capital is non a gift of nature. So it is non a principal or natural factor, it is made past times human being inwards majuscule goods industry. It is secondary equally good equally an artificial component of production.
- Productive Factor : Capital helps inwards increasing degree of productivity together with speed of production.
- Elastic Supply : Supply of majuscule depends upon majuscule formation process. Capital formation depends upon savings together with investment. By accelerating majuscule formation, majuscule provide tin live increased. But it is a long term process.
- Durable : Capital is non perishable similar labour. It has a long life dependent area to periodical depreciation.
- Easy Mobility : Movement of majuscule from 1 house to to a greater extent than or less other is easily possible.
- Is a Wealth : Since majuscule has all features of wealth viz. utility, scarcity, transferability together with externality, majuscule is a wealth exactly wealth doesn't necessarily move capital.
- Derived demand : As a component of production, majuscule has a derived need to gain finished goods which select a direct demand. e.g. need for raw cotton fiber is derived from need for cotton fiber cloth.
- Round nearly production : Capital goods doesn't satisfy our wants directly. But resources should live diverted towards production of majuscule goods first. And thereafter such produced hateful tin live used to gain consumer goods having direct demand.
- Social Cost : Resources select option uses. Either they tin live pose to production of majuscule goods or consumer goods. When resources are used for producing majuscule goods, it agency monastic say has sacrificed enjoyment of consumer goods. This is called social cost.
Types of Capital
The forms, classification or types of majuscule are:-
- Fixed capital : It refers to durable majuscule goods which are used inwards production over again together with over again till they vesture out. Machinery, tools, agency of transport, manufacturing works life building, etc are fixed capital. Fixed majuscule does non hateful fixed inwards location. Since the coin invested inwards such majuscule goods is fixed for a long period, it is called Fixed Capital.
- Working capital : Working majuscule or variable majuscule is referred to the unmarried utilisation produced goods similar raw materials. They are used straight together with alone 1 time inwards production. They larn converted into finished goods. Money pass on them is fully recovered when goods made out of them are sold inwards the market.
- Circulating capital : It is referred to the coin majuscule used inwards purchasing raw materials. Usually the term working majuscule together with circulating majuscule are used synonymously.
- Sunk capital : Capital goods which select alone a specific utilisation inwards producing a detail commodity are called Sunk capital. E.g. H5N1 textile weaving machine tin live used alone inwards textile mill. It cannot live used elsewhere. It is sunk capital.
- 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 majuscule which tin live used anywhere.
- Money capital : Money majuscule agency the coin funds available amongst the firm for purchasing diverse types of majuscule goods, raw stuff or for structure of manufacturing works life building, etc. it is also called liquid capital. At the outset the coin majuscule is required for ii purposes 1 for acquiring fixed assets i.e. fixed majuscule goods together with to a greater extent than or less other for purchasing raw materials, payment of reward together with coming together certainly electrical flow expenses i.e. working capital.
- Real capital : On the other hand, existent majuscule is referred to the majuscule goods other than coin such equally machinery, manufacturing works life buildings, semi-finished goods, raw materials, carry equipments, etc.
- Private capital : All the physical assets (other than land), equally good equally investments, which select income to an private are called private capital.
- Social capital : All the assets owned past times a community equally a whole inwards the shape of non-commercial assets are called social majuscule e.g. roads, world parks, hospitals, etc.
- National capital : Capital owned past times the whole acre is called national capital. It comprises private equally good equally world capital. National majuscule is that business office of national wealth which is employed inwards the reproduction of additional wealth.
- International capital : Assets owned past times international organizations similar UN, WTO, World Bank, etc., constitutes an International Capital.
