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Capital account surplus |
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Capital account surplusCredits minus debits on capital account. Same as balance on capital account. See surplus.Similar MatchesEfficient capital marketEfficient capital marketA market in which new information is very quickly reflected accurately in share prices. Planned capital expenditure programPlanned capital expenditure programBudgeted or projected outlays for major expenditures on permanent or fixed assets as outlined in the corporate financial plan. CapitalismCapitalismAn economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism. Paid in capitalPaid in capitalCapital received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. It would also include surplus resulting from recapitalization. Split capital investment trustSplit capital investment trustAn investment trust with a limited life, in which the equity capital is divided into two classes - income shares and capital shares.Holders of income shares receive the majority of the trust's income throughout its life and a specified capital amount on liquidationHolders of capital shares receive virtually no income during the trust's life but on liquidation receive all the assets after repayment of capital to holders of income shares. In other words they get the benefit of most of the capital growth.The raison d'etre of split capital investment trusts is that a single trust can accommodate the requirements of two types of investor in one fund, and provide better performance for both than they would be able to achieve if they invested in separate funds.It works like this:Ian Illingworth has £10,000 to invest and wants to get maximum income from it. He buys 'Income Shares' in the Split.Colin Casey has £10,000 to invest and wants to get maximum capital growth from it. He buys 'Capital Growth Shares' in the Split.The Split invests their pooled money and during the lifetime of the trust pays out all the income to Ian. At the end of the Split's life, when the capital value of the fund has risen to, say, £60,000, it pays Ian back his £10,000, and pays £50,000 to Colin.How have Ian and Colin benefited?Ian has benefited because for 7 years he has received the income on £20,000 even though he only invested £10,000.Colin has benefited because he has received the capital growth on £20,000 even though he only invested £10,000 and, being a higher-rate taxpayer, it has suited him very well not to have received any income on his £10,000 in that time.Basically, it is as if Ian said to Colin 'You have the capital growth on my £10,000' and Colin said to Ian 'Fine, I'll give you the income on my £10,000 in return.'There are many other classes of share within splits, and the thinking behind them gets progressively more complex. It is also important to note that Splits are geared investments (they can borrow money) which, depending on performance, can either be beneficial or detrimental to investors. If you are interested in what they have to offer it is essential to get specialist advice. Further SuggestionsShort-term capital flowCapital asset capital growth capital movement market capitalisation Capital augmenting Capital intensity Nasdaq small capitalization companies Balance on capital account Real capital Investment Company with Variable Capital Long-term capital Capitalization Weighted Index Capital gains tax Morgan Stanley Capital International Europe Index Capital International Indexes Capital mobility Capital abundant Capital turnover Capital expenditures Cost of capital Capital movement capital structure Leveraged recapitalization Capital-using |
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