Capital

Capital is the money and human-made resources a business uses to produce goods or provide services.

• Two main forms:
  • Money (financial capital) — cash in hand, savings, or borrowed funds used to run the business.
  • Physical capital — durable items like machines, tools, furniture, vehicles, computers, or buildings that help in production.
• Capital is different from raw materials: raw materials (like flour, cloth, or wood) get used up, but physical capital (like an oven or sewing machine) lasts and is used again and again.
• Why it matters: more or better capital can raise productivity—the same number of workers can produce more, faster, or with better quality.
• Capital often has a cost: when money is borrowed, the business usually pays interest; when money is raised by selling shares, the company may share profits as dividends.
• Everyday example: a street vendor’s cart and weighing scale are capital; a small workshop’s lathe machine is capital; a delivery app’s computers and bikes are capital.

Seeing capital this way helps explain how businesses grow: they usually need to add or improve capital to expand production and earn higher profits.