Tuesday, December 13, 2011

Different types of capital assets

Physical capital - or just 'capital' refers to any already-manufactured asset that is applied in production, such as machinery, buildings, or vehicles. In economic theory, physical capital is one of the three primary factors of production, also known as inputs in the production function. The others are natural resources (including land), and labor — the stock of competences embodied in the labor force. "Physical" is used to distinguish physical capital from human capital (a result of investment in the human agent)) and financial capital. Often used to mean fixed capital.

Fixed capital - not used up in the creation of a thing. Karl Marx emphasizes that it is really purely relative, i.e. refers only to the comparative rotation speeds (turnover time) of different types of capital assets. Fixed capital also "circulates", except that the circulation time is much longer, because a fixed asset may be held for 5, 10 or 20 years before it has yielded its value and is discarded for its salvage value.

Circulating capital - short-lived items that are used in production and used up in the process of creating other goods or services; includes raw materials, intermediate goods, inventories, ancillary operating expenses and (working capital). Contrasted with fixed capital.

Liquid capital - or fluid capital, a readily convertible asset, such as money or other bearer economic instruments, as opposed to a long term asset like real estate

Financial capital - money (the most fluid capital)

Human capital - the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience. [1] Many early economic theories refer to it simply as workforce, one of three factors of production, and consider it to be a fungible resource -- homogeneous and easily interchangeable. "...up to a point, consumption is investment in personal productive capacity." ~W. Lewis

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