Capital

What is Capital?

Capital is the original sum of money involved in a financial transaction. When you save money, this is the amount of your initial investment, or your ongoing investment including interest earned. When you borrow, this is the amount of the loan you originally seek from the lender. If interest is added to a credit facility, it is referred to as Capitalised Interest.

In economics, Capital can be used to describe the stock of goods used in the production of other goods. Classical economics regards Capital as a factor of production, distinguishing between Financial Capital and Physical Capital. Financial Capital is accumulated or inherited wealth held in the form of assets, such as stocks and shares, property and bank deposits, while Physical Capital is wealth in the form of physical assets such as machinery and plant. The term is also used to describe investment in a company as either share capital or debt (called loan capital).

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