Plan for raising large and long-term sums for investment in plant and machinery, over a period greater than the period considered under an operating budget. Techniques such as internal rate of return, net present value, and payback period are employed in creating capital budgets.
The process of dividing financial resources among several business functions and/or departments. The goal of capital allocation is to maximize output per dollar spent.
Percentage ratio of a financial institution's primary capital to its assets (loans and investments), used as a measure of its financial strength and stability. According to the Capital Adequacy Standard set by Bank for International Settlements (BIS), banks must have a primary capital base equal at ...
The amount of expense for adding additional assets or improving existing assets within a business. Capital additions are not repairs made to maintain the usability of equipment but may include new parts necessary to increase production or equipment life.
Pension plan in which employees make tax-deferred contributions from their salary to retirement accounts. This deduction reduces their taxable income and qualifies them for a lower tax bracket. Also called salary reduction plan.
General ledger account showing owners' investment plus net income from the firm's operations, less net losses (if any) from operations, less withdrawals of funds by the owner(s) for personal use.
An amount spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles) in order to increase the capacity or efficiency of a company for more than one accounting period. Also called capital spending.
Percentage of the production capacity (of a firm, industry, or industrial sector) actually used for production during a month, quarter, year. Also called operating ratio.
