The capital structure is closely related to the long-term financial situation of the company, even to finance and plan its future operations.
Capital:
The funds that the company owns can be divided into those that are contributed by the partners and those that are obtained from third-party loans, taking into account that the former will always be related to the amount of time that the resources are held by the entity, on income and business assets while it remains in operation and participation in decision-making.
Types of capital:
- Capital contributions: Consists of all the long-term funds that the owners provide to the company. This has three main sources of obtaining resources: preferred shares, common shares and retained earnings, each with a different cost and associated with each one. Debt capital: This includes any type of long-term funds that they are obtained by loans, with or without collateral, through the sale of bonds or negotiated. A company can only use a given amount of debt financing because of the fixed payments related to it.
Capital is:
All that amount of money or wealth that a person or entity has
New conception of capital:
For Paul A. Samuelson, the two original factors of production in a company are land and work, but a new category must be added that frames the new global productive system, the capital goods produced by the economic system and using them in the production of consumer goods or other production goods, and services. These capital goods can be short or long term since they can be rented or disposed of in the market, as well as land and labor in exchange for a payment proportional to the time and service provided.
The origin of capital:
To make a precision of this topic, the origin of the funds and the capital in a company must be distinguished, between its own and that of third parties or third parties.
- Own capital is the one that was deliberately limited for the constitution of a company, and that, in principle, does not have to be reimbursed. Foreign capital is made up of funds lent by elements outside the company, debts of the latter and against providers, etc.
The distinction between fixed capital and circulating capital is also interesting: the first, as its name implies, is the one that integrates imperishable resources or those with a relatively long life span, such as machinery and equipment in general, while the second is totally consumed in a single period and is within the production process as exhaustible and agricultural elements.
Capital is the financial means of obtaining a means of production.
Savings and interest: capital base:
Capital is constituted by saving, that is, by the use of a part of production for later productive purposes, such capital is consumed by the end of the period of use of the goods that are purchased or by the loss of their economic efficiency. As for circulating capital, it is consumed in the same way or considering its monetary aspect or equivalent, it may also be transformed into mobilized capital.
The capital receives a remuneration called interest, and can be fixed or variable depending on the results of its exploitation or the progress of the company. From being a simple remuneration of capital, interest also goes on to perform two basic functions: stimulating savings and using capital.
Capital and investment:
"When the goods are not consumed or their monetary equivalent is used for the purchase or creation of production goods, we will speak of investment", taking into account the previous definition, a distinction can be made between passive investment and active investment. By passive is understood the monetary investment of the individual who buys government bonds, stocks and commercial papers that can be traded in the stock market. In the active sense, investment means creation of new means of production or expansion of an existing means of production.
Investment classes
According to the origin:
- Public investment when carried out by the Administration Private investment when carried out by private individuals
According to use:
- Net investment when it includes funds for the creation or expansion of productive means Gross investment, when the replacement of worn-out productive capital is added to the net.
In the current market there can be no investment without a prior accumulation that can only be achieved by deferring or delaying consumption, that is, saving; And since we are in a dynamic equilibrium system, a country can invest more than it saves if other countries agree to lend it monetary means.
Long-term sources
* Long-term liabilities * Preferred shares * Common shares * Surplus
The problem of capital and its consolidation in Latin America
Starting from a situation of underdevelopment that is the one that mainly frames Latin American countries, the capital structures of companies must be strengthened, a strong investment rate is required, with the consequent problem that, as production is low, Savings and investment possibilities are very limited.
An authoritarian restriction on consumption that enables forced savings to be obtained, or the help of foreign capital, can consolidate an adequate capital structure for the constant growth of the economy.
Investment, as a creator of production goods, is vital for economic development: an economy could be achieved that would only recover the wear and tear of capital, but a growing economy needs creative investment in new productive means.
