Capital Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Capital, written in plain English, along with examples of how it is used.

What is Capital?

(n) Capital is used to represent the perpetual or long lasting nature of an activity, asset, property etc which are used for drawing periodical benefit out of it or which is necessary for its existence and sustainability. Eg. Share capital, Capital expenditure

History and Meaning of Capital

The term capital has its roots in the Latin word "caput," which means head. In ancient times, wealth was often measured in terms of the number of head of cattle or sheep that a person owned. Over time, the term capital began to be used to refer to any form of wealth that could be used to generate even greater wealth.

In modern times, capital refers to any asset that can be used to produce economic value. This can include physical assets like buildings and machinery, financial assets like stocks and bonds, and intangible assets like patents and copyrights. In the context of accounting, capital is often used to refer to the total amount of money invested in a business.

Examples of Capital

  1. A company issues shares of stock in order to raise capital to fund new projects or acquisitions.

  2. A factory purchases new equipment using capital expenditures to increase productivity and efficiency.

  3. A venture capitalist invests capital in a startup company in exchange for equity in the business.

  4. An individual invests capital in real estate in order to generate rental income.

  5. A government provides capital grants to businesses in order to stimulate economic development in a particular region.

Legal Terms Similar to Capital

  1. Equity - refers to ownership in a business and is often used interchangeably with the term capital.

  2. Assets - any resource owned by a business or individual that has economic value.

  3. Investment - the act of providing capital to a business or asset with the expectation of generating a return on that investment.

  4. Reserves - funds set aside by a business or government for future use or to cover unforeseen expenses.

  5. Working Capital - the difference between a company's current assets and its current liabilities, often used to measure a company's short-term financial health.