Capital Investment can be best described as the amount invested by the investors to enhance the company’s long-term business objectives. Capital investment can be physical assets like machinery, real estate or manufacturing plant.
The working and functionality of capital investment are a bit similar to other investments. For example, looking into the first step which is raising money, a company can raise money from angel investors, financial institutions or capital firms. A well-established firm/ company can arrange money from its own finances. It can also get the required money in exchange for stocks or by issuing bonds. In other words, an individual or a financial organization might make a capital investment as a loan or in exchange for a share of the profits down the road. Here capital means money. On the other hand executives of a corporation can make a capital investment within the business. In exchange for long-term assets that may facilitate the firm to run more efficiently or grow quicker. Here capital means physical assets.
The investing amount can depend on how well established your company is, if you are a start-up you can look to raise smaller amounts, whereas high industries like infrastructure and mining can look for huge amounts. The investment amount can also depend on the type of Capital investment. There are majorly 3 classifications for Capital Investment. However, depending on the company’s need the capital investment can be differentiated in different ways. These classifications depend on the asset conversion cycle.