Private capital

economic-dictionary

Private capital is that type of capital that is used by private economic agents, in order to develop their economic activities and, thereby, obtain an economic benefit.

Within the classification of the different types of existing capital, private capital stands out for being that in which its ownership falls on private agents. In this way, the ownership of private capital belongs to all types of families, as well as companies. They use the resources that make up this capital to obtain economic returns.

In this sense, private capital becomes the instrument available to the private sector to generate profits, based on certain resources.

Thus, this capital facilitates the development of a great variety of economic activities, through the generation of goods and services. That is, it makes up private investment.

Characteristics of private capital

The private type capital modality has some characteristics to be pointed out:

  • Investment source: Through private capital investments are generated and undertaken in a variety of business models.
  • Private origin: This capital comes from the resources of families and companies, destined to general value.
  • Relationship with debt: Often a source of private financing is the assumption of debt. In other words, private agents receive loans or credits in order to use their funds for private investment.
  • Generator of the business fabric: Usually, private capital is the most present in the different economies of the countries.This gives rise to the creation of employment and most of the companies of an economy, covering most of the economic sectors.

Examples of private equity

Following the concept of property, capital of a private nature encompasses all that set of capital belonging to agents that are part of the private sphere.

This supposes that there is a great diversity of examples in the economic day to day. This would range from the industrial machinery of a local company, to the pictorial collection of an individual.

In terms of accounting, the capital stock is a private example of the contributions that, originally, the partners make when creating a commercial company. These can be both monetary and in kind.

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