What Is Capital Formation? Capital formation is the net capital accumulation during an accounting period for a particular country. The term refers to additions of capital goods, such as equipment, tools, transportation assets, and electricity. Key Takeaways Capital formation is the net accumulation of capital goods, such as equipment, tools, transportation assets, and electricity, during
What Is Capital Funding? Capital funding is the money that lenders and equity holders provide to a business for daily and long-term needs. A company’s capital funding consists of both debt (bonds) and equity (stock). The business uses this money for operating capital. The bond and equity holders expect to earn a return on their
What Is a Capital Gain? The term capital gain refers to the increase in the value of a capital asset when it is sold. Put simply, a capital gain occurs when you sell an asset for more than what you originally paid for it. Almost any type of asset you own is a capital asset.
What Is a Capital Gains Distribution? A capital gains distribution is a payment by a mutual fund or an exchange-traded fund (ETF) of a portion of the proceeds from the fund’s sales of stocks and other assets from within its portfolio. It is the investor’s pro-rata share of the proceeds from the fund’s transactions. It is
What Is Capital Gains Treatment? Capital gains treatments are specific taxes assessed on investment capital gains as determined by the tax code. When a stock is sold for a profit, the portion of the proceeds over and above the purchase value (or cost basis) is known as capital gains. Key Takeaways “Treatment” refers to the amount
What Is Capital Gearing? Capital gearing is a British term that refers to the amount of debt a company has relative to its equity. In the United States, capital gearing is known as “financial leverage.” Companies with high levels of capital gearing will have a larger amount of debt relative to their equity value. The
What Are Capital Goods? Capital goods are physical assets that a company uses in the production process to manufacture products and services that consumers will later use. Capital goods include buildings, machinery, equipment, vehicles, and tools. Capital goods are not finished goods, instead, they are used to make finished goods. Key Takeaways Capital goods are
What Is Capital Growth? Capital growth, or capital appreciation, is an increase in the value of an asset or investment over time. Capital growth is measured by the difference between the current value, or market value, of an asset or investment and its purchase price, or the value of the asset or investment at the time it was acquired.
What Is a Capital Growth Strategy? A capital growth strategy seeks to maximize capital appreciation of an investment portfolio over the long term through an asset allocation geared to securities with high expected returns. Investors who use a capital growth strategy seek out companies and investments with the potential to grow at a higher rate
What Is a Capital Guarantee Fund? A capital guarantee fund is an investment in which the investor’s principal is shielded from any losses. With a capital guarantee fund, any losses experienced by the underlying investments are instead absorbed by the fund company. These funds therefore tend to invest the majority of their available capital in
