The meanings of the term Capital

The meanings of the term capital

The term capital is used with different meanings in the field of Economics and Finance.

In Finance and Accounting, Capital generally refers to financial wealth, especially to that used to sustain a business. Initially, we assume che other types of capital (physical capital for example), can be purchased with money or financial capital, so che no further analysis is needed of the latter.

Thus, the word "Capital? stands for "real capital? or "Capital goods? or "means of production?.

Capital is one of the three factors of production, while others are land and labor, goods that have the following characteristics are cities:

a. They can be used in the production of other goods (it is this feature that makes it a factor of production.

b. They are the work of man, as opposed to the "land? regard to available natural resources or minerals such as geographical locations.

c. Not used directly in production processes, unlike raw materials or semi-prepared.

The third part of the definition has not been fully used by classical economists. The quintessential classical economist, David Ricardo, would have used the above definition for the term fixed capital, including raw materials and intermediate products as part of its capital.

Karl Marx adds a distinction that is often confused with that of Ricardo. In Marxist theory, variable capital refers to capital investment in labor force, seen as the sole source of surplus value. It is called "variable? as the result of value that can produce varies based on consumption. On the other hand, constant capital refers to investments in factors of production "non-human?, Such as machinery and other implants, according to Marx, contribute only di replacement value of goods produced through their use. Is constant in the result of constant value used and also the remuneration received in the form of goods produced.

The investment or capital accumulation in classical economic theory is the act of creating a higher capital ratio to the original. To invest, goods must be produced to not be consumed immediately, but should be used to produce other goods and means of production. The investment is closely related to saving (though not the same thing). As Keynes noticed, saving means not spending all the entries in goods or services, while investment refers to spending on a specific type of asset, such as capital goods.

The Austrian school economist Eugen von Bohm-Bawerk says Capital intensity was measured from the lasted (roundaboutness) the production process.