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Capital good |
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Capital goodA good, such as a machine, that, once in place, becomes part of the capital stock.Similar MatchesReturn on capital employedReturn on capital employedA measure of a company's profitability. It may be defined as:Earnings before interest and tax divided by total capital employed plus short term borrowings minus total intangibles.ROCE takes all the assets employed in the business, including borrowings, and measures the return the company made on them. If a company has a low ROCE, it is using its resources inefficiently, even if its profit margin is high.Calculation: multiply operating profit by 100, and divide the result by total capital employedExample: Company A made an operating profit of £897m on total capital employed of £4,342m. ROCE was therefore (897 x 100) / 4,342= 20.66%Yardstick: A company's ROCE should be higher than the return on gilts (the benchmark for a risk-free investment return). And unless it is higher than the cost of borrowing, any increase in the company's borrowings or the general level of interest rates will reduce shareholders' earnings. A ROCE of 20% or more is considered very good. CapitalismCapitalismAn economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism. Core capitalCore capitalThe capital required of a thrift institution, which must be at least 2% of assets to meet the rules of the Federal Home Loan Bank. Capital investmentCapital investmentSee: Capital expenditure. Small capitalization (small cap) stocksSmall capitalization (small cap) stocksThe stocks of companies whose market value is less than $1 billion. Small-cap companies tend to grow faster than large-cap companies and typically use any stocks for expansion rather to pay dividends. They also are more volatile than large-cap companies, and have a higher failure rate. Further SuggestionsCapital turnoverCapital rationing Capitalization table capital market theory capital adequacy capitalisation issue Capital market Cost of capital capital growth Capital appreciation or depreciation Capital-using Capital intensity Dedicated capital overcapitalised Capital control Morgan Stanley Capital International (MSCI) Short-term capital flow Risk based capital ratio capital employed Capitalization rate capital movement Capital loss Capitalization Weighted Index Capital formation Capital market imperfection |
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