What is a Capital ResourceDefined with Examples
Capital Resources are man-made assets that encompasses machinery, equipment, buildings, etc. required in the manufacturing process of goods and services.
Unlike raw materials which are the basic material processed for further manufacturing, capital resources are important factors that aid in the productive activities of the company.
What Does Capital Resource Mean?
In the production of goods and services, there are many factors that contribute for a company to generate an output.
There are several resources involved – both natural and man-made.
For an asset to be considered as a capital resource, it must meet the following criteria:
- The asset must be man-made.
- It must contribute to the production activities of a manufacturing company.
- The asset can be used for more than once in the manufacturing of goods and services.
Given the characteristics above, it becomes easy to determine which factors of production are considered as a capital resource because some are natural such as labor and land.
They are used in the daily routine of the production process and are present in both service and manufacturing companies.
The benefit when companies have high levels of capital resource means that the production output increases and so will the levels of employment and economic improvements.
Examples of Capital Resource
ABC Bakery sells cakes and different pastries.
In their production process, they have ingredients such as flour, sugar, eggs, and butter which are considered as raw materials because they need to be further processed in order to come up with the final output.
The oven, mixer, mixing bowl, spatula, and baking trays are considered as the capital resource because they meet the criteria to be considered as one: they are man-made, contribute to the production process, and can be used in more than one instance of production.
Where the ingredients are considered to be raw materials, the baker is considered as a natural resource.
Should demand for more pastry products increase, an increase in capital resources can also be expected which will help in the production process.
This increase will be able to boost the economy of the community and open job opportunities for people.
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