Capital (factor of production)
Capital as a factor of production consists of produced resources used to make goods or provide services, such as machinery, tools and productive facilities. It differs from the financial funds used to acquire them and from owners’ equity in accounting. The same word therefore requires a clear economic or accounting context.
Worked example
A business borrows $30,000 to buy equipment. The equipment is productive capital in this economic sense; the loan is financing and does not become owners’ equity.
Common mistake
Using capital, cash, finance and equity as interchangeable terms.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Supporting | September 2026–June 2027 |
| FIA | FBT | Supporting | September 2026–June 2027 |
