What is a capital investment?

Capital investment is an acquisition of a fixed asset that is expected to have a long service life before it needs to be replaced or repaired. Two of the easiest recognizable examples of capital investments are land and buildings. However, the capital investment is carried out at any time for the company to buy goods that will benefit from the company but will not be used to cover the operating costs of the company.

Of course, a capital investment may not be an asset that is in line with equipment or land. Capital investment can be something as simple as the amount of money that is earmarked in an interest account. Since the source is not used to cover business expenditure, capital assets of this type can be used free of charge to generate additional income increasing interest. It would be right to consider the initial amount of money used to open a standard savings account as a capital ass, with the fact that the Bud interest rateE realized every year from a principal that changes the asset to a capital investment.

Many people think that in order to qualify as an identification as a capital investment, assets must be an item with a great initial value. In fact, fixed assets can carry any type of own value. The main characteristic of capital investment is not to fulfill a certain basic value, but the fact that the item is not required for common expenses associated with everyday life or business operations. Even part of the realization of some kind of interest is not necessarily qualified to be seen as a capital investment. Money that is held in a piggy bank or under a mattress would still be qualified as a capital investment, because it is expected that money (a) will have a long usable life and (B) is not required to maintain everyday operating or home.