explain different kinds of capital
Answers
Explanation:
Capital is anything that increases one’s ability to generate value. It can be used to increase value across a wide range of categories such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. This guide will explore all the above categories in more detail.
Types of capital are.
1. Financial
The most common forms of financial capital are debt and equity.
Debt is a loan or financial obligation that must be repaid in the future. It has an interest expense attached to it, which is the cost of borrowing money. The cash received from borrowing money is then used to purchase an asset and fund the operations of a business, which in turn generates revenues for the company.
Equity is an ownership stake in a company, and equity investors will receive the residual value of the company in the even it is sold or wound-down. Unlike debt, it does not have to be repaid and doesn’t have an interest expense associated with it. Equity is used to fund the business and purchase assets to generate revenue.
2. Human
Human capital is used by business to create products and perform services that can be used to generate revenue for the company. Companies don’t “own” people they way they do other assets. The most common types of human capital are intellectual and skills/talents.
Intellectual refers to the intelligence of people, which can be used to successfully run a company, think creatively, solve problems, form strategies, and outperform competitors.
Skills and talents are used in much the same way as intelligence to help a business operate and generate revenues. Skills do not necessarily require mental capacity and can include manual labor, physical exertion, social influence, etc.
3. Natural
Natural capital can also be used by businesses to generate income and increase production. Many businesses use natural resources such as water, wind, solar, animals, trees, plants, and crops to operate their company and increase value over time.
Companies may or may not own the natural assets they require .
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Answer:
Capital is anything that increases one’s ability to generate value. It can be used to increase value across a wide range of categories such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human.
Types of Capital
The different types of capital include:
1.
Capital in Business
The focus of this guide is on capital in a business context, which can include all three of the broad categories above (financial, human, natural). Let’s explore each of the categories in more detail.Financial
The most common forms of financial capital are debt and equity.
Debt is a loan or financial obligation that must be repaid in the future. It has an interest expense attached to it, which is the cost of borrowing money. The cash received from borrowing money is then used to purchase an asset and fund the operations of a business, which in turn generates revenues for the company.
Equity is an ownership stake in a company, and equity investors will receive the residual value of the company in the even it is sold or wound-down. Unlike debt, it does not have to be repaid and doesn’t have an interest expense associated with it. Equity is used to fund the business and purchase assets to generate revenue.
2. Human
Human capital is used by business to create products and perform services that can be used to generate revenue for the company. Companies don’t “own” people they way they do other assets. The most common types of human capital are intellectual and skills/talents.
Intellectual refers to the intelligence of people, which can be used to successfully run a company, think creatively, solve problems, form strategies, and outperform competitors.
Skills and talents are used in much the same way as intelligence to help a business operate and generate revenues. Skills do not necessarily require mental capacity and can include manual labor, physical exertion, social influence, etc.
3. Natural
Natural capital can also be used by businesses to generate income and increase production. Many businesses use natural resources such as water, wind, solar, animals, trees, plants, and crops to operate their company and increase value over time.
Companies may or may not own the natural assets they require to ope