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Capital

Definition:

Capital is usually defined in one of two buckets, physical capital and financial capital. Having capital is a sign of financial strength, and is used to generate wealth for a company through investments.

Example:

Capital can be used to purchase assets like equipment and software, it has value and ownership can be transferred from one company or individual to another.

Book Excerpt:

(Excerpts from Financial Intelligence, Chapter 12 – On the Other Side)

Physical capital is plant, equipment, vehicles, and the like. Financial capital from an investor’s point of view is the stocks and the bonds he holds; from a company’s point of view it is the shareholders’ equity investment plus whatever funds the company has borrowed. “Sources of capital” in an annual report shows where the company got its money. “Uses of capital” shows how the company used its money.

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