Understanding Capital – Types, Sources and Benefits (Complete)

Understanding Capital – Included in an important factor in manufacturing activities. For companies that are just starting up or in business, capital is used to run the business operations.

Results in production are reused for further production. Then, when developing the definition of capital, surplus value, purchasing power and the ability and power to use capital goods are emphasized.

In this discussion, we will explain in full and clearly the definition of capital, its types, sources and benefits. For a full review, come on… Read on as follows.

What is meant by Capital?

Understanding Capital is a collection of goods or money that serves as the basis for carrying out an order.

Capital in English means capital, namely goods produced by nature or humans to produce other goods needed by humans in order to make a profit.

Capital is included in a very important thing with a company. Without capital, a business cannot run as it should. Starting from large companies and small businesses, and requires capital to run a business.

In essence, capital is a company’s most important capital to do business, which is generally in the form of funds. With money, a business can run smoothly by supporting a production process to marketing.

Type – Type of Capital

There are types of capital and functions, among them are as follows:

1. Types of Capital Based on Capital Source

Capital based on its source can be divided into two parts, namely external capital and internal capital, including the following:

a. External Capital

External capital is capital from outside the company or funds that have been obtained from a shareholder or creditor who can participate in the company. Since internal capital is limited, there is a need for external capital which can be drawn from outside and is not limited.

b. Modal Internal

Internal capital is the existence of capital that is usually obtained by the company from the sale itself. It is difficult to use internal capital to grow the business because it is limited and it is difficult to see the improvements that have been significant.


2. Types of Capital Based on Existence

The types of capital that can be distinguished based on their form, namely abstract capital or passive capital or concrete capital or active capital, including the following:

a. Abstract Capital (Passive Capital)

Abstract modals are the opposite of concrete modals, which cannot be seen in plain text. However, this capital is also important for the sustainability of the company, for example in relation to copyright, job qualifications, and branches.

b. Concrete Capital (Active Capital)

Concrete capital is active capital, which can be seen in the form of materials or materials. This includes concrete capital such as location, raw materials, warehouses, machinery, and other forms of infrastructure.

3. Types of Capital Based on Function

Because of its function, capital can be divided into two parts, namely social capital and individual capital, which are as follows:

a. Social Capital

Social capital is a capital for the community in which the capital can bring a benefit to the public in carrying out production activities. Examples are ports, highways, and markets.

b. Individual Capital

Individual capital is capital that comes from someone who has the function of facilitating various activities and generating profits for the owner. Examples are deposits, shares, personal property, and so on.

Capital Benefits

There are various benefits in a capital, including the following:

  • Boost with an investment in an economy that is developing a much needed investment. The level of investment increases with the creation of new companies facilitated with venture capital.
  • To be able to support the company’s development, growing companies need large funds, and these funds are not always available in an adequate manner.
  • One of the difficulties with starting a new company is the difficulty of raising capital. With the presence of venture capital, obstacles can be removed.
  • By streamlining technology transfer, the technology within a company is not always the best technology. It takes a large amount of money to get the best technology.
  • Facilitate creation in new companies.

Capital is included in a very important thing with a company. With money, a business can run smoothly by supporting a production process to marketing.

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Thus, the discussion that we have conveyed is complete and clear, namely regarding the Definition of Capital, its types, and their benefits. Hopefully this review, can be useful and beneficial for all of you.

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