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Simple English definitions for legal terms
capital
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A quick definition of capital:
Capital: Capital is something that helps people or businesses make things or do things that make money. It can be things like money, machines, or ideas. Companies can get capital by borrowing money or selling part of their company to investors. The way a company gets its capital is called its capital structure.
A more thorough explanation:
Capital
Capital refers to any asset that is used to produce goods or services. It can be a physical item like cash, machinery, or buildings, or an intangible item like intellectual property or human capital. Capital can also refer to the way a company finances its operations, either through debt capital or equity capital. The combination of debt and equity a company uses to finance its business is called its capital structure.
- A bakery uses its ovens, mixers, and other equipment to produce bread and pastries. These items are considered capital.
- A software company has developed a new program that it plans to sell. The program is considered intellectual property and is a form of capital.
- A clothing store raises money by selling shares of its company to investors. This is an example of equity capital.
- A construction company takes out a loan from a bank to purchase new equipment. This is an example of debt capital.
These examples illustrate how capital can be both tangible and intangible, and how it can be used to produce goods and services. They also show how companies can use different types of capital to finance their operations.