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WEEK 4
TOPIC: CAPITAL
CONTENT:
- Meaning of Capital
- Types of Capital
- Importance of Working Capital.
Sub-topic 1: Meaning of Capital
This is the total amount of money employed to run a business. It represents any form of wealth set aside for the production of further wealth.
There are two schools of thought or views above the above definition. These views are the accountant point of view and the economist point of view.
Accountant’s Definition of Capital: This is the total assets of a business entity, less its liability due to third parties outside the firm. It is also the original money with which a person used to start a business. It can be derived as follows:
Total Assets – All liabilities = Capital.
Economists’ Definition of Capital: Capital is wealth reserved or used for the production of more wealth. It is also referred to as any man-made tool or equipment that helps in the production of goods and services.
Layman’s Concepts
To the layman, capital is the total amount of money for running a business.
Evaluation:
Define Capital.
Sub-topic 2: Types of Capital
There are various types of business capital. These are:
- Authorized /Registered/Nominal Capital: This is the total amount stated in the Memorandum of Association and approved by the registrar of companies which a company can issue out for subscription.
Issued Capital: This is part of authorized capital which has been approved and the company decides to issue out to the public for subscription. For example, if ₦10 million worth the
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