Capital resources definition includes all the man-made elements referring to an economic concept where they are employed to manufacture goods and services over an extended time. They cover resources which allow the business to aid in productive activities.
It includes equipment, tool, infrastructure, and machinery exploited to receive an outcome. The capital resources definition is available for both services and manufacturing businesses because the term is broad with context to be used in both.
Meaning of Capital Resources
For a better understanding, the terminologies factors of production and capital resources definition might be mixed. But, factors of production include both man-made and natural resources while capital resources only refer to man-made ones.
Capital resources add up to the economy since an increase in investment leads to more productive output that turns to higher employment levels concluding in an overall improvement in an economic system.
Characteristics that are to be considered for counting into capital resources are as follows:
- Must be used over some time. However, this time varies depending on the expectancy of the capital resource used, and may not be worked only once.
- Part of the manufacturing process and the capital resource should be indulged in the process of making the product.
Capital resources examples
Capital resources examples can be explained as follows:
- We can take a bakery shop. Now, the bakery counts on edible measures like flour, sugar and eggs for making the doughs in the large mixing machines. After getting it ready, the dough is divided into pans which are then baked by placing into ovens to bake. After the cake or puffs are ready they are iced or decorated with extras like chocolate, candies, sprinkles etc. So what could be natural and capital resources for such a business?
The cake pans, mixing machines, along with the oven used all of them are counted under the meaning of capital resources definition. However, the raw materials used would be flour, eggs, icing, sugar and sprinkles since they are used in their original form and used only one time.
- Supposedly there is a company XYZ that produces carton folders and manufactures paper for academic and business purposes. The new offers upgraded the sales forecasts definition resulting in the urge to increase the capacity of the plant.
To get this working, the company will spend a certain amount of money to expand the capacity and meet the demand forecast methods levels. Investing in equipment and machinery i.e the capital resources definition will help to expand the company itself and also the output.
Moreover, it creates a positive vibe among the community due to new job availability that could be created and taxes being paid at different levels to the government. Furthermore, it would be clear under natural, human and capital resources examples.
Types of capital resources
The types of capital resources definition are parcel and part of the company or the business running. The broad types can be described as follows:
This type of capital is required by the business to ensure that it functions and operates as per the requirements standardised by the business. For example, day-to-day operational needs or expenses finance that is needed to run. Similarly, money for the issue of machinery, or purchase of property could also be termed finance capital.
Common two forms of financial capital are debt and equity. Debt includes the repayment or financial obligation that needs to be treated as a loan with the cost of lending money. In equity investors get the residual value of the business for the money invested in the parts of selling.
Although it is treated as the source of money rather than the capital resources definition itself. As a result, it must be counted as part of it but not categorised under the official types of capital resources.
As the term suggests it refers to the human resources which are necessary to convert the machinery, raw material and other non-human capital resources definition to use. Therefore, with no human resources, it becomes difficult or impossible for the company to do well.
This must be noted that the company does not own the people like the other assets. The human capital includes skills or talents and intellectuals. Intellectual highlights the intelligence of people used to think creatively, form strategies, outperform competitors and solve problems to rum a company.
Whereas skills help to generate and operate revenues aiding the intellectual part. It does not only counts mental capacity but physical exertion, manual labour, social influence etc as well.
Man-made capital resources definition involves the equipment and other machinery which is required to access the production or manufacturing process inside the business. As the name suggests they are not natural and are installed or supplied or made by human beings or industries.
This kind of capital is used as a helping hand or raw material to increase production and generate income. Natural resources like wind, water, trees, plants, animals, and crops are included to increase the value.
Moreover, businesses may or may not own the natural and capital resources definition which is required to operate. Therefore the differentiation got cleared more through natural, human and capital resources examples.
Capital resources aid production
We already understood from the capital resources definition that assets are man-made and used in the production of other items. Being produced by man is what makes them unique from natural resources. Mostly the working capital i.e funds of the company has or loaned are used to purchase the capital resources for the running of the business.
They are often termed as a company’s fixed assets which depreciate in time or value listed in the financial statements of the company. Now the capital resources definition type depends upon the type of business run:
- Plant nursery: Sheds, other buildings, and greenhouses, metal or wooden display shelves, grow lights, soils, pots, horses, water misters, fertilizers, or other nutrients, seeds and cutting to grow plants, hand wagons for customers to make hauling easy, and the land where the nursery is present.
- Computer services company: Desktop computers and/or laptops for each cubicle, chairs and desks for employees, copiers, computer software, paper shredders, fax machines, supplies like pens, paper clips, pens etc and phone system or mobile phones available.
Human resources get work done
Although they do not fit in the capital resources definition the human resources use the equipment of the company and aid to accomplish the company’s goals. Few human beings operate the machinery that produces the products while some answer the phone calls, make schedule meetings, rest keep track of finances i.e circular flow of income and expenditure of the company, manage departments and supervise other employees. At last, the top executives that make big plans give direction in which operations and decisions are made affecting the whole company.
Therefore, employees are paid since the company purchases their skills, expertise or services according to the needs of the company. Examples of human resources could be highlighted as:
- Chief financial officer
- Chief executive officer
- Typists and receptionists
- Sales force definition representatives
- Accounts clerks
- File or mail clerks
- Other servicemen or unskilled workers
This place defines matching employee interests and talents to the job. Whether it means switching him to other jobs within the company. This way, they are willing to come to work and are motivated and happier. Resulting in greater productivity that benefits the business line.
Natural resources get consumed
Similarly, natural resources do not form part of the capital resources definition directly. But aid in or get consumed during the production of products. Natural resources like oil, coal and gas are taken into use while running a business.
- For example, the truck used for delivery service is owned and could be used again, while the gas used to operate them is depleted. Businesses can purchase these capital resources definition when in need or hire the rights for the entire gas reserve.
- They have therefore termed as long terms assets of the company and counted at the price level accounting is computed. As a result, they are spent time and termed depleted. Since they are gone for good of the company and reserve will not fill again.
- Examples of natural resources depend upon the kind of business. That could be raw gems for emeralds or jewellery, gas for the fleet of vehicles or foresting rights for lumber etc.
Is money a capital resource?
Revising the capital resources definition, the man-made things like machinery, tools and other effective equipment are categorised under the definition. Therefore, to explain is money a capital resource we have further discussion.
It simply exists as a medium of exchange for buying goods and services having a store of value. Replacing the barter system, money is used as a common unit. Which can be exchanged for anything with non-perishability and standard value.
Money has been depicted as the standard form to convert any item’s value and represent them with quantitative numbers. This is computed for easy comparison between different commodities by depicting them in common something.
Moreover, the reserves of gold or intangible assets like goodwill are also converted into monetary figures for standardisation and better understanding. It makes human work less critical by providing a medium of segregation for all. Therefore, money becomes a tool of measure to count on any activity performed or product purchased in a business.
However, since everything is calculated or worth is computed in terms of money so it becomes an important perspective for the business. Not only capital resources definition, profit and loss for the company, expenses, incomes, working capital, loans, assets, even intangible assets etc are valued in monetary terms.
But as the question arises that is money a capital resource so the answer becomes no money cannot be termed a capital resources definition. The criteria of human-made although does lie in money, but is not produced for further resell. It is rather a medium through which all activities or the production happens.
Therefore, the capital resources definition explains that human-made elements are categorised as capital resources. However, all the other that aid in production or make use of capital resources definition also forms a part of it.
Human resources briefly cover the people or employees under production work. Whereas natural resources include the elements available from the environment like gas, oil etc. This whole set does not involve money since it acts as the medium of exchange only.