(a) What is Capital?
(b) Explain five types of Capital.
Explanation
(a) Capital is man-made wealth that is used for the production of more wealth. It exists in form of tools, equipment, machinery, factories, vehicles, etc, which are used for production.
(b) Types of Capital are:
(i) Authorised: This is the amount of money that the company is empowered to raise for its business as stated in its Memorandum of Association. It is known as nominal or registered capital.
(ii) Issued capital: This is the total amount of shares that are actually issued for subscription to members of the public.
(iii) Paid-up capital: This is the actual amount of capital that shareholders have paid to the company.
(iv) Called up capital: This is the amount of money called upon the shares that have been subscribed. It is that portion of the issued capital for which shareholders have been asked to make Payment.
(v) Capital owned: Capital owned is the excess value of the assets of a business over the value of its liabilities.
(vi) Capital employed: Capital employed is the total assets of the business, both fixed and current.
(vii) Liquid capital: Liquid capital is also known as circulating capital. It is made up of cash in hand, cash at the bank and any other assets (debts) which can be converted into cash.