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Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,012 solutions Accounting23rd EditionCarl S Warren, James M Reeve, Jonathan E. Duchac 2,210 solutions What Is Capital Investment?Capital investment is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Real estate, manufacturing plants, and machinery are among the assets that are purchased as capital investments. The capital used may come from a wide range of sources from traditional bank loans to venture capital deals. Key Takeaways
Capital InvestmentHow Capital Investment Works
In either case, the money for capital investment must come from somewhere. A new company might seek capital investment from any number of sources, including venture capital firms, angel investors, or traditional financial institutions. When a new company goes public, it is acquiring capital investment on a large scale from many investors. An established company might make a capital investment using its own cash reserves or seek a loan from a bank. It might issue bonds or stock shares in order to finance capital investment. There is no minimum or maximum capital investment. It can range from less than $100,000 in seed financing for a start-up to hundreds of millions of dollars for massive projects undertaken by companies in capital-intensive sectors such as mining, utilities, and infrastructure. Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. Special ConsiderationsA decision by a business to make a capital investment is a long-term growth strategy. A company plans and implements capital investments in order to ensure future growth. Capital investments generally are made to increase operational capacity, capture a larger share of the market, and generate more revenue. The company may make a capital investment in the form of an equity stake in another company's complementary operations for the same purposes. Disadvantages of Capital InvestmentThe preferred option for capital investment is always a company's own operating cash flow, but that may not be sufficient to cover the anticipated costs. It is more likely the company will resort to outside financing. Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides:
Which are the most likely uses of capital invested in the business?The uses of capital are where money goes. Executives can invest in the business through capital expenditures, increases in working capital, research and development, or mergers and acquisitions. These investments allow a company to grow.
What is capital investment in business?Capital investment is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Real estate, manufacturing plants, and machinery are among the assets that are purchased as capital investments.
What are examples of capital investments?Vehicles, buildings, computer equipment, furniture, machinery, and land are all examples of capital investments. For a trucking company, this could mean buying more trucks to expand its fleet or fix ones that have broken down.
What is a capital investment quizlet?Define Capital Investment. A large sum of funds, future expenditures and benefits.
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