Capital & Fund
Capital is the wealth that is invested to start a business and earn more money as compared to what is invested. Without capital, a business cannot even start. Such capital can be used for buildings, machinery, working of the business, costs involved in producing goods and services, the salary of employees, etc. Funds are the money that is allocated by the company for specific purposes and utilized for growing the business and earn profits.
What are the Characteristics of Capital?
The characteristics of capital are:-
- Productive Factor:The presence of capital increases the production of the business. Where there is adequate capital involved there are higher chances that production will increase in a better way.
- Man-made: It is not available in nature. It is formed by man for obtaining benefit out of it. Man inputs capital to obtain output as produced goods and services. So, it is not a primary or natural factor but is a secondary or artificial factor.
- Easy-Mobility: Capital is mobile. It can move from one place to another as it is not rooted at one point. As per the requirement, such can be transferred from one place to another.
- Durability: Capital is not perishable. It is long-lived and it exists till the time the organization exists. The durability fluctuates at the time but it remains for the long run.
- Round-about Production: The capital directly does not satisfy the needs but the goods and services that come into existence by using the capital available are what helps in the improvement of life using such goods and services.
What are the Types of Capital?
There are four types of Capital-
- Debt Capital
- Equity Capital
- Working Capital
- Trading Capital
- DEBT CAPITAL
Debt capital/funds are funds that are derived by the company which will be repaid on a later date. Such is borrowed from the shareholders who invest in the company. Such capital can be for long term or short term. It is different from equity capital in the way that it does not make the investors become part owners of the company.
- EQUITY CAPITAL
Equity Capital involves the investors being part owners in the company. They are known as shareholders. Different from debt capital which does not make the investors owner of the company while equity shareholders make the investors owners to the company. They bring in capital, takes risks directly or indirectly to run the business.However, the investment of capital made by the shareholders is obtained back by them only on the liquidation of the company.
- WORKING CAPITAL
Working capital is the money that is invested into the day-to-day working of the business. Basically, working capital is the difference between current assets and current liabilities. Current assets are the money that is available in the bank or assets that are available to the company which is convertible to cash if needed. Current liabilities are the debts/liabilities on the company that has been accrued in the way of a loan by the company for its work. After covering the liabilities with the assets/money available to the company what is left is working capital.
- TRADING CAPITAL
Trading capital is the type of capital that is available to the company and is used for buying and selling assets. Trading capital is a very important part of a business as it is responsible for the expansion and growth of the business.
What are Funds?
Funds are a huge amount of money that is allocated for performing specific purposes. Funds in a business are raised for investing the same in the business which directly affects the growth of the business. Funds are involved for the building of the business, machinery, services involved in the business place, costs involved in the production of goods, transport of goods, etc.
What are Capital Funds?
Capital funding is the cash that moneylenders and equity holders contribute to a business for day-to-day and long-haul needs. An organization’s capital financing comprises both Debt (bonds) and Equity (stock). The business utilizes this cash for working capital. The bond and equity holders expect to acquire a return from their investment as interest, dividends, and stock appreciation. It is a very important part of a business as it what a business stands in the market.
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- Commercial Contracts- Shareholders Agreement, Voting rights agreements, Business Purchase Agreement, Non-Compete Agreement, Non-Disclosure Agreements, Stock Swap Agreements, Employment Agreements, Transaction Agreements, and Escrow
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- The advice in Corporate Law
- Risk Assessment and transaction support.
- Strategy and Structuring advice with respect to applicable RBI guidelines, FDI Regulations, Income Tax provisions, SEBI regulations, DTAAs, Stamp Duty.
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