What do we mean by capital?
Capital is one of the main sources of funding for a company, together with self-financing and credits.
As for many other financial concepts, the term capital can cover a range of meanings, depending on whether we consider it in the broader or restrictive sense, with economic, accounting, philosophical or other perspectives. Here, capital as a source of company financing corresponds to the concept of share capital.
Share capital is made of cash contributions (liquid assets) and contributions in kind (property) invested in a company by one or more investors, in exchange for shares in said company.
A social share represents an ownership title and provides its holder, the shareholder, with a certain number of rights with regard to the company.
- Political rights such as voting rights and rights to information
- Financial rights such as the right to a monetary share of the profits (dividend or interest) or in case of liquidation of the company
- Property rights such as the right to guarantee, loan or transfer the shares held.
The share capital appears as a liability on the balance sheet, and forms part of the equity (with which it is often assimilated, depending on the meaning given to the concept of capital). It represents the company's debts to the shareholders due to their contributions
The contributions are shown as assets on the balance sheet (in return for the capital), in the form of liquid assets (in case of a cash contribution) and other types of assets (in case of a contribution in kind). They constitute the company's resources
The different sources of capital contributions
The capital may be formed by:
- One or more entrepreneurs running the company project
- External company investors (private or public)
- Individual external investors
In the last two cases, this is referred to as risk capital.