What is the capital
The concept of capital, according to the business dictionary, indicates that it is wealth in the form of cash or assets, and it is evidence of the financial strength of an individual, organization, or nation, and is used for development and investment.
In another definition of capital, it represents the financial resources that companies use to finance their activities, such as machinery, equipment, and other resources, as it is considered a vital and essential source of financing, and they are assets that enable businesses to produce products and services and provide them to people, and capital is raised by companies through the sale of shares And bonds to investors, either in cash or in assets.
Types of capital The following are some types of capital:
- Debt capital: It is capital that is obtained through the borrowing process, and it can be collected through banks or institutions.
- Insurance, friends, family, or other sources.
- Equity capital: it is capital that is built on investments and does not need to be repaid, such as debt capital, and private investment is one example of this type of capital.
- Working capital: It is the capital that refers to the difference between the assets that companies trade, and between receivables and liabilities, and is used to measure the extent of short-term liquidity of companies, and the ability of companies to pay their debts within one year.
- Commercial Capital: Trade capital is called financing, and it refers to the money allocated to the sale and purchase of securities.
- The difference between money and capital Many people believe that money and capital symbolize the same thing, but there is a difference between them.
- Money refers to the tool that is used in the sale of products, goods, and services to people directly, and capital refers to the tool that contributes to building companies And its development, and the financial resources it owns in cash, or in the form of assets.
In every project, small or large, the amount of capital must be calculated, which is the amount of money allocated to be invested in a specific project, and it is owned by the owner of the project, and without providing capital, the project cannot succeed and establish its roots on the ground, and the capital is calculated with several Methods, we will introduce you to them in this article, but it is necessary to familiarize yourself with the types of capital that exist at the outset.
Types of capital and methods of calculating it
Fixed capital, which is the amount paid in preparing the initial foundations of the project, which are materials that do not change, do not enter into commercial exchange or consumption within production cycles, and which are used in the production of various goods and services.
Fixed capital in most economic activities: land, buildings and facilities, machinery, equipment, motive energy, equipment, raw materials, and auxiliary materials.
Mobile capital, which is money that is paid for work, and constitutes the wages of workers and raw materials, and through it capital growth takes place in the project, as it enters into a renewable economic cycle.
The acquired capital is an amount of money obtained from the profits of the project, then it is stored to face any financial problem that may occur in the future, in addition to its use in emergency situations such as faults, and this money differs from the basic capital, paid at the beginning of the project.
Closed capital, which is the capital closed to a certain number of investors, without adding any new shares, and no share of it is issued to a joint investor except in the event that the investment ends, and the price of the share in the closed capital investment is determined on the basis of the investment value and based on its price In the market by supply and demand.
Open capital, which is a capitalist system, in which participation shares can be refunded or new shares issued at any time, unlike closed capital.
The authorized capital is the capital written in the contract, which is the maximum capital of the company, which can only be changed with the approval of all shareholders in the project, and it also represents the upper limit of the value of the shares that can be subscribed to.
The capital of the worker is the amount of the current assets in the project, the amount of the current liabilities in the project is taken from it, and it expresses the facility’s ability to finance its various operations, as well as pay its financial obligations.
The invested capital, which is the working capital, plus all long-term assets, which is equivalent to long-term liabilities plus equity, and expresses the minimum return that is expected to be achieved by investors and creditors.