Capacity and Capital: Difference between pages

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1. ''Law''.  
1. ''Financial reporting''.


If a company or individual lacking contractual capacity purports to enter a contract, the contract may not be enforceable.  
In financial accounting, capital is money the business owes the owner.  


Problems of contractual capacity may arise, for example, in relation to requirements for dual signatories to bind certain companies or to bind companies of particular kinds in certain [[jurisdiction]]s.
This is equal to assets minus liabilities (including debt).


Other potential capacity problems - relating more to individuals - include minors, mental incapacity or intoxication.
In other words, the equity.


Equity capital funds the net assets of the business.


2. ''Banking''.  
It also acts as a buffer to absorb losses or other deficits, to support the business to continue its operations following financial stress.


In relation to the individuals whom a bank will authorise to open and operate a bank account, the appropriate level of seniority and the role of the individuals within the business of the customer.


2. ''Corporate finance''. 


3.  
More broadly in the corporate finance context, 'capital' is the total amount of funding available for the operations of an organisation.


More generally, the ability to absorb or hold.  For example, tax capacity or borrowing capacity.
This includes both its debt and its equity.


(Tax capacity being the ability to use tax reliefs efficiently to shelter otherwise taxable profits or gains. Borrowing capacity being the maximum amount of borrowing which can be sustained based on a firm's expected future cashflows and its assets.)
 
3. ''Company law''.
 
More narrowly in company law, 'capital' is the component of the total equity represented by the share capital of the company.
 
 
4. ''Regulation''.
 
In the regulatory capital context, 'capital' means what the particular detailed regulations say that it means.
 
Here as elsewhere, care and consistency in definitions is essential.
 
Regulations and related supervision specify minimum mandatory amounts of capital, held for the protection of direct stakeholders and the wider community.
 
 
5. ''Economics''.
 
'Capital' is one of the 'factors of production' in economics, the others classically being labour, land and enterprise.
 
In this context, 'capital' traditionally referred to the things that have been created to help in the production process, like machinery, factories and transport facilities. These things are sometimes known as 'capital goods'.
 
Human capital, natural capital and social capital are also fundamentally important parts of economic capital.
 
 
6. ''Individual capital''.
 
The valuable and productive longer term resources available to an individual including their knowledge, skills, relationships, physical and financial resources.




== See also ==
== See also ==
* [[Contract]]
* [[Assets]]
* [[Minor]]
* [[Capital adequacy]]
* [[Capital goods]]
* [[Capital intensity]]
* [[Capital market]]
* [[Capital mobility]]
* [[Capital structure]]
* [[Capital to labour ratio]]
* [[Capitalisation]]
* [[Capitalism]]
* [[Corporate finance]]
* [[Cost of capital]]
* [[Credit balance]]
* [[Debt]]
* [[Debt capital]]
* [[Enterprise]]
* [[Equity]]
* [[Equity cost of capital]]
* [[Factors of production]]
* [[Finance ]]
* [[Financial risk]]
* [[Funding]]
* [[Human capital]]
* [[Interest]]
* [[Investment bank]]
* [[Labour]]
* [[Land]]
* [[Liabilities]]
* [[Natural capital]]
* [[Public interest]]
* [[Regulatory capital]]
* [[Return]]
* [[Servitisation]]
* [[Share capital]]
* [[Social capital]]
* [[Stakeholder]]
* [[Working capital]]


[[Category:Long_term_funding]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Compliance_and_audit]]
[[Category:Compliance_and_audit]]

Revision as of 15:26, 30 December 2020

1. Financial reporting.

In financial accounting, capital is money the business owes the owner.

This is equal to assets minus liabilities (including debt).

In other words, the equity.

Equity capital funds the net assets of the business.

It also acts as a buffer to absorb losses or other deficits, to support the business to continue its operations following financial stress.


2. Corporate finance.

More broadly in the corporate finance context, 'capital' is the total amount of funding available for the operations of an organisation.

This includes both its debt and its equity.


3. Company law.

More narrowly in company law, 'capital' is the component of the total equity represented by the share capital of the company.


4. Regulation.

In the regulatory capital context, 'capital' means what the particular detailed regulations say that it means.

Here as elsewhere, care and consistency in definitions is essential.

Regulations and related supervision specify minimum mandatory amounts of capital, held for the protection of direct stakeholders and the wider community.


5. Economics.

'Capital' is one of the 'factors of production' in economics, the others classically being labour, land and enterprise.

In this context, 'capital' traditionally referred to the things that have been created to help in the production process, like machinery, factories and transport facilities. These things are sometimes known as 'capital goods'.

Human capital, natural capital and social capital are also fundamentally important parts of economic capital.


6. Individual capital.

The valuable and productive longer term resources available to an individual including their knowledge, skills, relationships, physical and financial resources.


See also

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