Management Notes

Reference Notes for Management

Finance raised to operate a business is called

Finance raised to operate a business is called

a) Labour
b) Entrepreneurship
c) Land
d) Capital

The correct answer for the given question is Option d) Capital

Finance raised to operate a business is called

Answer Explanation for Question: Finance raised to operate a business is called

Concept of Capital in Finance

Capital refers to anything that contributes value or benefits to its owner, such as a factory and its machinery, intellectual property like patents, or the financial assets of a company or an individual. It is true that money itself can be construed as capital, but the term is more frequently associated with cash used for productive or investment purposes. A business’s day-to-day operations and future growth are largely dependent on capital. It is possible for business capital to be raised through debt or equity financing. Businesses of all kinds tend to prioritize three types of capital when budgeting: working capital, equity capital, and debt capital. An organization in the financial industry defines trading capital as the fourth component.

A company’s capital is typically cash or liquid assets held or acquired for expenditures. A company’s assets, such as its equipment, real estate, and inventory, can be thought of as assets with monetary value if extended in a broader sense. Capital is also a means by which wealth can be measured and also a means for increasing wealth through direct investments or capital projects. Assets such as capital and capital assets constitute a person’s wealth. For daily expenses, companies have working capital, debt capital, and equity capital. A company’s or individual’s ability to finance its working capital and invest its gained capital determines its success.

Profits are generated by companies by using capital to pay for production of goods and services. Capital is used by companies to invest in all kinds of things to create value. The two most common areas of capital allocation are labor and building expansions. Businesses and individuals invest capital in order to earn a higher return than the capital costs.Economists conduct studies of financial capital at the national and global levels to determine how it impacts economic growth. Economists monitor several measures of capital, including personal income and personal consumption, in the Commerce Department’s Personal Income and Outlays reports.

Data on capital investment can also be found in gross domestic product.Business and financial capital are typically assessed using a company’s capital structure. As directed by the central banks and banking regulations, U.S. banks are required to hold a minimum amount of capital as a risk mitigation requirement (sometimes known as economic capital).It is up to private companies to establish their own capital thresholds, assets, and capital requirements for corporate investment. Businesses do most of their financial capital analysis by analyzing their balance sheets closely.


I hope after going through this post you might have clearly understood the Question: Finance raised to operate a business is called Capital.

Trade credit may be used to finance a major part of a firm’s working capital when

Leave a Comment