Capital is defined as the wealth of any individual or business whether in the form of property, money or human resource. Depending on the form it takes, capital can be categorized as financial capital, real capital or capital goods, and human capital or labor.
The word capital is most often used to refer to the money used to start and operate a business. This actually refers to financial capital, which can be defined as the funds used by businesses to purchase the necessary equipment and goods in order to produce further goods and/or provide service. Initially financial capital is sourced through investors and lenders; however, extra revenue can lead to capital buildup. The extra capital is used for business expansion, specifically to buy more equipment and goods for production, upgrade facilities and give bonuses as well as salary increases to employees.
Real capital or capital goods refer to the actual physical equipment and goods used for production of goods or in the provision of service. Examples of real capital include cooking utensils and raw ingredients for chefs, livestock for farmers and dynamite for demolition crews.
Human capital refers not just to the actual number of people needed to run a business but more importantly to the skills and knowledge that each individual possess that contribute to the process of production. The value of human capital has been getting more attention with business now investing more on giving their employees educational opportunities, usually in the form training – both theoretical and hands on.
