A factor of production responsible for equipment and money.
Types of Capital
Loan Capital
Capital that is given for free
Debt Capital
Capital given and expected to be repaid
- Lent and must be repaid
- Lender has no say to where their money goes
- Lender gets interest Obtain this from: Banks
Overuse of debt capital can lead to:
- Too much debt - assets seized
Equity Capital
Capital given in exchange for Corporation Shares
- Money given and never repaid
- Investor gets a say in where the money goes
- Both investor and owner share the money Obtained by: Investors through Investment Banks
Too much equity capital can lead to:
- Lack of business control
- Share Dilution