6 Important Characteristics of Capital

6 Important Characteristics of Capital are listed and explained herein. We do hope you find it educative and able to satisfy the demands of your research.

Important Characteristics of Capital

Characteristics of Capital
Characteristics of Capital – Photo Source: https://www.slideshare.net

Read Also: Types and Importance of Capital

Capital could largely be defined as a manmade asset that is used in the production process simply put, capital refers to wealth or goods made by man to be used in the production of other goods and services. It may also be defined as the stock of previous wealth invested in order to produce wealth in the future.

When capital is properly combined with some other factors, it produces goods and services. Don’t get your kind narrowed, capital is not limited to currency, it could be in the form of physical cash, cutlass, hoe, machines, or machinery.

Intellectual properties, buildings, motor vehicles, raw materials, semi-finished goods, tools, and other equipment can be used in the production of goods and services.

Features or Characteristics of Capital

Read Also: Division of Labour and Values

Characteristics of capital are as follows:

1. Capital is made by man

Capital, irrespective of its form is made by man before it can be used for the production of goods and services. Whether it is in cash or kind, as long as it is capital for investment, it is usually made by man.

2. Capital is durable

Capital generally is durable assets that can stand the test of time, they usually are not made of anything, so they can be used over a long period of time without the fear of failure or breakdown. They last for a very long time, this is why they are often called ‘capital’, being the base for every business.

3. Capital exists in different forms

It is not just money or currency that is often capital. The capital of any business varies depending on what the entrepreneur deems fit as well as the immediate need for investment as such, capital may be in a physical form such as buildings, motor vehicles, plants, and other machinery and it can also be in liquid forms such as cash or money.

Read Also: Causes of Low Capital Formation and Accumulation in West African countries

4. Capital is subject to depreciation

Although it lasts long, capital is usually in most cases subject to depreciation, especially when it comes to physical assets such as motor vehicles, buildings, plants,s and other machinery which is used in the company to do work, as long as it is being used (or even unused sometimes) it is subjected to depreciation.

5. It ensures large-scale production

When there is enough capital, companies, and firms are able to embark on large-scale production of goods and services.

This is often the causative factor behind the justification of small or large firms. The larger the capital made available for a company, the larger the number of products produced by the firm.

Read Also: Functions of National Economic Reconstruction Fund

6. It promotes division of labor

The availability of enough capital helps a company to promote the practice of division of labor. Capital helps to boost man labor, if a company has enough cash as capital for the expansion of their business, they can easily employ more staff and when there are more persons working in a company, division of labor is made much easier because while one person is on one task, the other could go ahead and do something else that will boost up the productivity of the company and this is where teamwork sets into the company.

You must have realized by now that capital is more than physical cash, it is more of what you have to bring in for the startup of a business.

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like