C A P I T A L I N T H E
C O M P A N Y
A M A L I A N A D I F T A U L F A , S P , M S C
D E F I T I N I O N O F C A P I TA L
• * Classic: The products which are used for further production.
• * In its development the definition of capital becomes: value, purchasing power or the power to use or use what is contained in capital.
• Concrete capital is next to the debit (on the balance sheet) is an active capital that shows “shape“.
• Abstract capital is in credit (on the balance sheet) is a passive capital that shows the source or origin.
• Wealth structure shows the ratio between current assets and fixed assets.
Based on the method and duration of turnover, active capital is divided into current assets and fixed assets.
a. Current asset; assets that are depleted in one run revolve in the production process and turnover process in a short time.
b. Fixed assets; long-lasting assets that do not expire or are gradually depleted in the production process .
Based on the function of working assets in active capital companies is divided in to:
a.Working capital;the total of current assets.
b.Fixed capital; the total of fixed assets.
The difference: Working capital is more flexible, The composition of working capital is relatively variable, Working capital is shorter turnover process.
C L A S S I F I C A T I O N O F P A S S I V E C A P I T A L
Own capital / venture capital: originating from own company
(reserves, profits) or coming from partakers, participants or owners (share capital, participant capital, etc.)
Foreign capital / creditors: comes from the creditor, is a debt for the
company concerned.
F I N A N C I A L S T R U C T U R E
Reflects the balance between foreign capital and the amount of own capital.
1. Normal state; a balance between the amount of fixed assets (plus iron stock) with own capital.
Current asset Foreign capital Fixed assets
+
Iron inventory
Owner's equity
2. Own capital is "insufficient" to spend or cover fixed assets (plus iron stock).
Current
asset Foreign capital Fixed
assets +
Iron inventory
Owner's
equity
3. Own capital is "more than enough" to finance or cover fixed assets (plus iron stock)
Current
asset Foreign capital
Owner's equity
Fixed assets
+
Iron
inventory
T A S K : L E A R N I N G J O U R N A L O N S P A D A
1. What is the primary function of a financial manager ?
2. Explain the difference between internal financing and external financing ! 3. Explain the difference between active capital and passive capital !
