Question

what is capital as defined in the financial industry?

Answer 1

Ans: - In business capital simply means assets or more specifically financial assets such as money held in deposit accounts as well as it can also be referred to as physical factors such as machinery equipment to manufacturing products, it also includes the buildings used to manufacture and store products.

But in the financial industry, it means the capital structure of the company. The capital structure of the company means the proportion in which the company has used debt and equity as a source of finance or in other words it simply means the financial model of the company. It is advisable to keep debt and equity in balance if the company has a larger debt then it simply means the company has more liabilities which is to be paid whether they make a profit or not and the company is prone to default and if the company has larger equity it means the decision power will be distributed to its shareholders and is not limited to the few people in the company. Therefore the capital in the financial industry is nothing but the capital structure of the company or financial model of the company.