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Simple English definitions for legal terms
capital investment
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A quick definition of capital investment:
Term: Capital Investment
Definition: Capital investment is when a business buys something important, like a building or equipment, or borrows money from a bank or investor to help grow the business. The bank or investor expects to get their money back with interest or a share of the profits.
A more thorough explanation:
Capital investment
Capital investments refer to the money a business spends on acquiring assets or the money a financial institution loans to a business in exchange for repayment or a share of profits.
- A business purchases a new building to expand its operations.
- A venture capital group loans money to a startup in exchange for a percentage of ownership in the company.
The first example illustrates a capital investment where a business acquires a capital asset, in this case, a building. The second example illustrates a capital investment where a financial institution loans money to a business in exchange for a share of the profits. In this case, the startup receives the necessary funds to grow their business, while the venture capital group receives a return on their investment.