Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Capital

What it is:

Capital is anything used to generate income.

How it works (Example):

Let's say Company XYZ has $1 million of cash, a widget-making machine and a fleet of delivery vehicles. These items generate income: The cash earns interest, the widget-making machine makes widgets that have a 10% profit margin, and the delivery vehicles support the operation.

In the economic sense, capital comes in many forms: currency, equipment, land or even people.
 

Why it Matters:

Capital makes the business world go 'round because it reflects and determines what is bought and sold in an economy. In the economics world, centuries of debate have existed over who should control a nation's capital, who is oppressed by those who have more capital than others, and how capital should be distributed.