What Is Capital Maintenance? Capital maintenance, also known as capital recovery, is an accounting concept based on the principle that a company’s income should only be recognized after it has fully recovered its costs or its capital has been maintained. A company achieves capital maintenance when the amount of its capital at the end of a
What Is a Capital Note? A capital note is short-term unsecured debt generally issued by a company to pay short-term liabilities. Capital notes carry more risk than other types of secured corporate debt, because capital note holders have the lowest priority. Key Takeaways A capital note is a type of unsecured debt a company might
What is Capital Outflow? Capital outflow is the movement of assets out of a country. Capital outflow is considered undesirable as it is often the result of political or economic instability. The flight of assets occurs when foreign and domestic investors sell off their holdings in a particular country because of perceived weakness in the nation’s economy
What Is a Capital Pool Company (CPC)? A capital pool company (CPC) is an alternative way for private companies in Canada to raise capital and go public. The capital pool company system was created and is currently regulated by the TMX Group, and the resulting companies trade on the TSX Venture Exchange in Toronto, Canada.
What Is a Capital Project? A capital project is a long-term, capital-intensive investment to build upon, add to, or improve a capital asset. Capital projects are defined by their large scale and large cost relative to other investments that involve less planning and resources. Key Takeaways A capital project is an often-pricey, long-term project to
What Is Capital Rationing? Capital rationing is the process through which companies decide how to allocate their capital among different projects, given that their resources are not limitless. The main goal is to maximize the return on their investment. Key Takeaways Capital rationing is a process that companies use to decide which investment opportunities make
What Is Capital Reduction? Capital reduction is the process of decreasing a company’s shareholder equity through share cancellations and share repurchases, also known as share buybacks. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure. Key Takeaways A capital reduction is the
What Is a Capital Reserve? A capital reserve is a line item in the equity section of a company’s balance sheet that indicates the cash on hand that can be used for future expenses or to offset any capital losses. It is derived from the accumulated capital surplus of a company and is created out
What Is Capital Risk? Capital risk is the potential of loss of part or all of an investment. It applies to the whole gamut of assets that are not subject to a guarantee of full return of original capital. Investors face capital risk when they invest in stocks, non-government bonds, real estate, commodities, and other
What Are Capital Expenditures (CapEx)? Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CapEx is often used to undertake new projects or investments by a company. Making capital expenditures on fixed assets can include repairing a roof (if the
