- ACCOUNTANT, S DEFINITION OF CAPITAL: He defines capital as the monetary value of the excess of business assets over its
- liabilities. This is the net worth of the business.
- ECONOMIST, S DEFINITION OF CAPITAL: The economist regards capital as all manmade resources or assets that are used for the production of more wealth. Thus the economist regards capital as a factor of production.
- LAYMAN, S DEFINITION:To a layman ,capital is the amount of money he has invested in his business.
TYPES OF CAPITAL;
- AUTHORIZED, REGISTERED OR NOMINAL CAPITAL:This is the total amount of capital in the form of shares which a company is authorized to issue out to the public.
NOTE:The capital is stated in the memorandum of Association submitted to the corporate affairs commission (CAC) i.e registrar of companies for approval and which has subsequently been approved.
- ISSUED CAPITAL:This is part of the authorized or nominal capital that the company decides to issue out to members of the public for subscription.
- CALLED UP CAPITAL: This is part of the issued capital that the shareholders have been asked to make payment which will form part of the issued capital.
- PAID UP CAPITAL: It is the part of the called up capital which the shareholders have actually paid.
- UNCALLED CAPITAL:It is the part of issued capital that has not been paid for.
- CAPITAL OWNED: It is also referred to as equity .It is the total value of assets over the total value of liabilities (long and short term liabilities).It is the owner,s equity or financial interest in the company.
7 .FIXED CAPITAL:This is the durable property of the business organization which is used continuously for production of goods and services .It is the type of capital which does not change according to the volume of production .It is made up of durable goods such as motor vehicles ,equipment ,building etc
LOAN CAPITAL :This is referred to as the total amount of money which the firm borrowed from external sources.
IMPORTANCE OF WORKING CAPITAL.
- It is used in measuring the firm’s capability in paying its debts.
- It is used as basis for planning.
- It is a sign of viability of business enterprises.
- It is used in determining the circulating capital available for day to day running of the business organization.
- It gives investors the inside strength of the business organization.
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