Types and Importance of Capital

4 Types of Capital are given in this article. We hope you find it informative and able to satisfy the demands of your research.

4 Types of Capital

You must have read in our previous article what capital is and some of the characteristics of capital. In this article, we will take a look at the different types of capital that exists on earth as well as looking at the importance of capital that is how and why capital needs to be in place for effective products to be done but first of all, let’s look at the different types and forms of capital.

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

4 Types of Capital
Types of Capital – Photo Source: https://mymbaguide.com

The different types or forms of capital include the following:

1. Fixed capital

These are assets that are not used up in the course of production, they are never exhausted during the cost of productions.

Fixed assets have to do with those durable assets of a business that can last for a very long time without needing a replacement.

These assets or capital do not change their form in the process of production. Examples of fixed capital are land, buildings, tools. motor vehicles, plants, and machinery. The only things that could befall a fixed asset it probably in the advent of loss, damage, or theft.

Read Also: 5 Businesses You Can Start Without Capital

2. Circulatory or working capital

These kinds of assets are those assets that are usually used up in the course of a production. These circulatory or working capital are made up of capital goods which either change their form or are used up in the process of production.

Examples of working capital include raw materials, water, and fuel. They are capitals that are used to make production possible.

3. Current or liquid capital

The current capital is those types of capital that are needed for the day-to-day running of activities of production. They are also known because of their nature to transform from one form to another. Examples are finished goods and money.

For example, if you won a bakery, you will need cash to buy some raw materials like flour, sugar, and butter and in order to buy these things, the cash which is a start-up capital will have to transform into these items for production to take place effectively.

Read Also: Functions of National Economic Reconstruction Fund

4. Social capital

These have to do with those forms of capital or assets that are provided by the government which facilitate production.

Examples of social capital are basic social amenities that are made available by the government such as roads, electricity, water, and telephones.

These social amenities when they are readily available, aid the process of production and when they are not made available, production is stunted.

By Wisdom Enang

I am Wisdom Enang; a Writer, Editor, and Publisher. To do businesses with us, reach us on our email or connect with me personally by clicking on Facebook.

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