Definition of capital

Capital is a compound of assets, material, and intellectual and financial property used in the production and sales of the final product with the aim of making a profit.

Types of Capital


  • Equity is what the company has left after paying out all liabilities and debts; for example, material and non-material assets
  • Loaned capital is all the borrowed resources, such as loans, installment plans, or pre-payments for the future supply of products

By investment volume:

  • Main capital is everything that is used in production: buildings, machines, and equipment
  • Working capital is everything that turns into a final product: crude materials, billets, and accessories

By type of investment:

  • Real capital is all types of physically existing assets, including intellectual property: buildings, instruments, patents, etc
  • Financial capital is all the finances of the company, including cash or securities

How to calculate capital

Equity is calculated by the formula:

Assets - Liabilities = Equity

  • Assets are all the assets of the company on the balance
  • Liabilities are all the liabilities on the company's balance

How investors can use information about capital

  • Investors can assess the assets of the company and its prospects
  • The bigger the company's equity, the more dividends it can potentially pay
  • Upon liquidation and paying off the liabilities, the company can distribute the remainder among its investors