Capital is a term that refers to the sources of financing that the enterprise uses to ensure its activities.
The basic criterion for the breakdown is the ownership of the capital:
- Equity - comes from the owners
- Foreign capital - borrowed resources (e.g. from banks, suppliers or other financial institutions)
In addition, the capital can be divided according to the method of its acquiring:
- External capital - come from owners and other entities outside the enterprise
- Internal capital - the enterprise creates it by its own activity
Capital breakdown according to the time of application:
- Permanent capital - available for an unlimited time period
- Short-term (available for less than 1 year)
- Long-term (available for a period longer than 1 year)
Capital structure of the enterprise:
In addition to using the term as a designation for capital funds in the corporate economy, we can see capital as a production factor. In this case, the capital is a production factor consisting of goods involved in the production of other goods. Profit is then an economic yield of the capital. Capital has here the form of fixed assets that is involved in the production process and it wears out, and current assets that consumes in the manufacturing process.
Waht is capital for?
Capital plays an indispensable role in the organization. To get the assets required for the operation, the enterprise must have sufficient financial resources - capital. The aim of the management should be the optimization of capital structure.