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What is a Capital Resource?

Dams used to generate power to run a factory are one form of a capital resource.
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  • Written By: Malcolm Tatum
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  • Last Modified Date: 18 August 2014
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Capital resources are understood to include assets that are utilized in the process of producing goods or services as part of a business operation. While the range of assets that can be included in this category is very broad, it is important to note that not all assets are capital resources. There are a few basic qualifications that govern what assets can properly be referred to by this term.

One of the basic criteria for an asset to be considered a capital resource relates to the long-term use of the asset in the production of goods and services. In general, it will be anticipated to aid in the creation of products for an extended period of time. Manufacturing machinery is an excellent example, as is the support equipment that is used to keep the machinery in good working order. In fact, the building that houses the machinery will also qualify as a capital resource.

This type of resource can also be defined as something that aids in the storage of the finished goods, pending their sale and shipment to customers. For this reason, a warehouse will be considered a capital resource, especially if the manufacturer owns the space. Support structures that aid in the force or power needed to drive the machines used in production may also be included. Dams that help to generate power for the factory operation also meet the basic criteria.

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One important asset that is usually not considered a capital resource is cold hard cash. Money, in just about any form, cannot be considered part of this category. This is because currency is the medium that allows for the acquisition of a capital resource, rather than being the resource proper. While money is necessary to the function of any business, currency does not directly result in production of goods and services. In addition, money cannot be used to provide force or power to the machinery that actually produces the finished products.

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lovealot
Post 5

At a big complex of resources like a large university, it takes a complex capital resource management team to coordinate funds from various sources, how to spend them, and priorities of needs. Someone was talking about this on the radio the other day.

One group is responsible for planning for new buildings and renovation. They also need to make sure that the funds are spent correctly.

Another group takes care of matters having to do with property and manages the different state funds, campus funds, and the gift funds.

The third group works with space. Which program will best fit in what facilities.

These three groups work together to manage all those resources like space, buildings, equipment, and properties that fill the needs of the university.

Clairdelune
Post 4

@ValleyFiah - Your comment was interesting. I never thought about it, but it makes sense that companies would not want a lot of money for the long term because of inflation. If they need money for an emergency, I guess they might risk losing big time on their investments.

ValleyFiah
Post 3

Another reason that cash is not seen as a capital resource is because cash is a short-term asset. Cash is usually not saved for the long-term because it loses value due to inflation. Companies usually convert all of the cash they have except for what they absolutely need into short-term and long-term investments.

anon26191
Post 1

what are the liabilities against capital resources?

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