Question

what are the broad types of capital

Answer 1

What Is Capital?

Capital is a term for financial assets, such as funds held in deposit accounts, as well as for tangible factors of production, i.e. manufacturing equipment. Additionally, capital includes facilities, including buildings used to produce and store manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify as capital.

Types of Capital

Here are the top four types of capital:

Debt Capital

A business can acquire capital through the assumption of debt. Debt capital can be obtained through private sources, such as friends and family, financial institutions and insurance companies, or through public sources, such as federal loan programs.

Equity Capital

Equity capital is based on investments that, unlike debt capital, do not need to be repaid. This can include private investment by business owners, as well as contributions derived from the sale of stock.

Working Capital

Defined as the difference between a company's current assets and current liabilities, working capital measures a company's short-term liquidity—more specifically, its ability to cover its debts, accounts payable and other obligations that are due within a year. In a sense, it's a snapshot of a firm's financial health.

Trading Capital

Trading capital refers to the amount of money allotted to buying and selling various securities. Generally, trading capital is distinct from investment capital in that it is reserved for more speculative ventures. Trading capital is sometimes referred to as "bankroll."

Investors may attempt to add to their trading capital by employing a variety of trade optimization methods. These methods attempt to make the best use of capital by determining the ideal percentage of funds to invest each time. In particular, in order to be successful, it is important for traders to determine the optimal cash reserves required for their investing strategies.