Glossary entry
Capital is the financial or productive resources committed to a business or investment activity. A company can obtain financial capital through equity, borrowing, or retained earnings and use it to support operations and assets. In personal investing, capital often refers to the funds placed at risk, which should be distinguished from income and emergency cash.
Illustrative example
A business combines owners' equity and a bank loan to fund equipment. Both provide capital, but the loan creates repayment obligations that equity does not share.
What to consider
The meaning depends on context: accounting capital, regulatory capital, and trading capital differ. Money committed to investment may not remain readily recoverable.
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