What is Capital ? ( Meaning, Definition and Type of Capital)

Capital is an investment which invested by Partners, Proprietor, or an Entrepreneur, in their businesses. The capital may be introduced in business as both monetary or assets form. The main purpose behind the capital investment in the business is to start the business properly and run there business smoothly.

Definition of Capital.

Capital refers to the financial resources used in business to fund their operations like plant & machinery, cash, equipment, and other resources. These resources allowed to produce products or services to sell to the customer.

Type of Capital.

There different types of Capital

1) Fixed Capital:-   It refers to the durable capital goods, which used in the production of goods again and again until they wear out. Like machinery, tools, factory, building, etc are fixed capitals.

 2) Working Capital:- It refers to the amount which helps to run the business. The funds being constantly used to pay for core business operations, which are any activities involved in the creation of goods or services is known as working Capital or floating capital. This includes all types of inventory, operations expenses, Cash, and account receivables.

Working capital is best defined as total current assets less with total current liabilities.

Working Capital= Current Assets - Current Liabilities.

Or

Account receivable + Inventory - Account Payable.

3) Sunk Capital:- It refers to the capital goods which have specified use in producing a particular commodity. For Example, a Printer machine can use only for paper printing. Or A textile waving machine use for textile mills only. It cannot be used elsewhere.