9. BUSINESS MANAGEMENT
Capital and sources of capital
Capital refers to the money that is raised for the business with the purpose of generating a worthwhile return on investment. Capital is a significant factor for business since it is used from the beginning of the business and used to run a business. Moreover, capital makes production and trading effective and allows the business to expand.
Capital can be classified into:
2.1 FIXED CAPITAL
Fixed capital refers to capital that is raised by the business to purchase a fixed asset, which means an asset that has more than one year of economic use, such as land, buildings, machines, and other office appliances.
2.2 WORKING CAPITAL
Working capital means capital that is raised by the business to purchase current assets, which is an asset that has less than one year of economic value, or to run a business, so working capital will be used to buy materials and products, or to pay for labor, insurance premiums, transportation, advertisements, and utilities.
Sources of capital
Sources of capital include:
1. Sources of capital from the business which include initial capital, retained earnings, and depreciation.
2. External sources of capital which include fund raising, debtor funds, and funds from other supporters.