Whether you’re a new startup or you’ve been in business for decades, your company needs capital to grow and thrive. And, having a solid understanding of capital and how it can benefit your company can help you regardless of what stage your business is in. So, what is capital?
Capital definition:
So, what does capital mean? Capital is anything that increases your ability to generate value. You can use capital to increase value in your business’s financial assets. Generally, business capital includes financial assets held by your company that you can use to leverage growth and build financial stability.
Capital and cash are not one and the same. Capital can be stronger than cash because you can use it to produce something and generate revenue and income (e.g., investments). But because you can use capital to make money, it is considered an asset in your books (i.e., something that adds value to your business).
So, how does capital work? Companies can use capital to invest in anything to create value for their business. The more value it creates, the better the return for the business.
Capital examples
So, what does capital include? Capital can expand to a variety of things in business, both tangible and intangible. Here are a few examples of capital:
- Company cars
- Machinery
- Patents
- Software
- Brand names
- Bank accounts
- Stocks
- Bonds