capital (economics)

In economics, the stock of goods used in the production of other goods. Classical economics regards capital as a factor of production, distinguishing between financial capital and physical capital. Financial capital is accumulated or inherited wealth held in the form of assets, such as stocks and shares, property, and bank deposits, while physical capital is wealth in the form of physical assets such as machinery and plant. The term is also used to describe investment in a company as either share capital or debt (called loan capital).

Fixed capital is durable, examples being factories, offices, plant, and machinery. Circulating capital is capital that is used up quickly, such as raw materials, components, and stocks of finished goods waiting for sale. Private capital is usually owned by individuals and private business organizations. Social capital is usually owned by the state and is the infrastructure of the economy, such as roads, bridges, schools, and hospitals. Human capital is what enables people to earn a living, and may be enhanced by better education, training, and health care. Investment is the process of adding to the capital stock of a nation or business.