VAE 511: Livestock Entrepreneurship (1+0)

FINANCIAL CAPITAL VS REAL CAPITAL

• Financial capital refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment for producing goods/services.
• Real capital comprises physical goods that assist in the production of other goods and services such as milking machine, chaff cutter etc., .
• Financial capital is provided by lenders for a price: interest.
• Furthermore, financial capital, or economic capital, is any liquid medium or mechanism that represents wealth , or other styles of capital.
• It is, however, usually purchasing power in the form of money available for the production or purchasing of goods, etcetera.
• Capital can also be obtained by producing more than what is immediately required and saving the surplus.
• Financial capital may be subcategorized as
  • Economic or productive capital necessary for production
  • Signaling capital which signals a company's financial strength to shareholders, and
  • Regulatory capital which fulfills capital requirements.