Own and Borrowed Capital
Capital contributed by the owner or entrepreneur of a business, and obtained, for example, by means of savings or inheritance, is known as own capital or equity, whereas that which is granted by another person or institution is called borrowed capital, and this must usually be paid back with interest. The ratio between debt and equity is named leverage. It has to be optimized as a high leverage can bring a higher profit but create solvency risk.
Read more about this topic: Financial Capital
Famous quotes containing the words borrowed and/or capital:
“Most of our occupations are low comedy.... We must play our part duly, but as the part of a borrowed character. Of the mask and appearance we must not make a real essence, nor of what is foreign what is our very own.”
—Michel de Montaigne (1533–1592)
“Woman—with a capital letter—should by now have ceased to be a specialty. There should be no more need of “movements” on her behalf, and agitations for her advancement and development ... than for the abolition of negro slavery in the United States.”
—Marion Harland (1830–1922)