Types of Capital
The four major types of capital include:
- Working capital
- Debt
- Equity
- Trading capital
Trading capital is used by financial institutions, particularly by brokerages and other financial institutions. When a company employs debt capital, it incurs a corresponding debt liability on the balance sheet.
The capital structure of a company determines what mix of these types of capital it uses to fund its business.
Capitals in Economics
Economists look at the capital of a family, a business, or an entire economy to evaluate how efficiently it is using its resources. Capital is a broad term for anything that provides value or an advantage. This can include tangible assets like a factory and its equipment, intellectual property such as patents, or financial assets owned by a company or individual.
While money itself can be capital, the term more commonly refers to funds used for production or investment.
Factors of Production
The factors of production, contributing to a country’s gross domestic product (GDP), encompass:
- Land
- Labor
- Entrepreneurship
- Capital
Capital as a factor of production covers a broad range of financial assets.