CAPITAL.
Hey Guyz, Happy Friday. Thank God it’s Friday Again,
God has been Faithful this week, don’t you think. Well today we are back to
Econs. 101.
Capital may be defined as man-made assets used in
production. In other words, Capital refers to man-made wealth or goods used to
produce other goods and services. It may also be defined as the stock of
previous wealth invested in order to produce future wealth. Examples of Capital
are Physical Cash, Cutlass, Buildings, Machines, semi-finished goods, and other
equipment.
equipment.
CHARACTERISTICS OF CAPITAL:
1. Capital
is man-made.
2. Capital
is durable.
3. Capital
exists in different forms.
5. It
is subject to depreciation.
6. It
promotes Division of Labour.
TYPES OF CAPITAL:
1. FIXED
CAPITAL- These are assets which are not used up
in the course of production. These include durable assets like Land, Buildings,
Motor Vehicle etc.
2. CIRCULATORY/
WORKING CAPITAL- These are assets which are used up in
the course of production. They either change their form or are used up in the
course of production. Examples are Raw Materials, Water, Fuel etc.
3. CURRENT/
LIQUID CAPITAL- These are types of Capital that are
required for the day-to-day running of productive activities. Examples are
Money, Finished Goods etc.
4. SOCIAL
CAPITAL- This includes those forms of
capital/assets provided by the government that aid production. Examples Roads,
Electricity, Telephones etc, these when available aid production.
IMPORTANCE OF CAPITAL
1. Capital
facilitates Production, because when they is adequate capital, production would
be increased.
2. Capital
boosts Efficiency, in the sense that with adequate capital they would be more
machines that would boost efficiency.
3. It
increases Standard of Living
4. It
ensures the production of Quality goods.
CAPITAL FORMATION &
ACCUMULATION: This refers to increasing a country’s
stock of real capital. It refers to increasing the net investment in form of
fixed assets.
For a Country to be
able to accumulate more capital, there must be increase in savings and a
reduction in consumption of consumer goods.
CAUSES OF LOW CAPITAL
FORMATION IN WEST AFRICA.
1. Wasteful
Expenditure.
2. Higher
Propensity to Consume.
3. Low
Savings.
4. Inequitable
Distribution of Income.
CAPITAL CONSUMPTION:
It refers to using up of existing capital stock and not replacing worn-out
capital goods used in production. When Fixed Assets like Buildings, Motor
Vehicle are used continuously, they tend to undergo wear and tear (that is
Depreciation), which reduces their value.
This concludes our
session for today, Hope you found this Helpful and Fun. Until we meet again,
remain ever blessed and remember you are for SIGNS & WONDERS. God Bless
You.
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