Capital Addition

DEFINITION of 'Capital Addition'

The cost involved for adding new assets or bettering existing assets within a business. Capital additions can take the form of adding new parts that could be reasonably expected to increase useful life or potential, and/or adding new assets to increase production.

Capital additions are not to be confused with repairs, which only maintain the life of an asset. Capital additions are expected to increase the life or productivity of an asset.

BREAKING DOWN 'Capital Addition'

Although the term is usually used in the cases above to describe capital investments in long-term assets within a company; capital addition is also used to describe the cost of improvements by a tax payer to personal property (particularly real estate).

In banking, "capital addition" is used to describe new investment of funds to the bank.

RELATED TERMS
  1. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  2. Capital Cost Allowance - CCA

    A yearly deduction or depreciation that can be claimed for income ...
  3. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  4. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  5. Property, Plant And Equipment - ...

    A company asset that is vital to business operations but cannot ...
  6. Asset Valuation

    A method of assessing the worth of a company, real property, ...
Related Articles
  1. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  2. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  3. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  4. Investing

    Operating Leverage Captures Relationships

    Find out how fixed and variable costs interact to shed new light on old companies.
  5. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  6. Economics

    Financial Leverage In Corporate Capital Structure

    Corporate management uses financial leverage to increase earnings per share and return-on-equity.
  7. Economics

    What Happens in a Make-or-Buy Decision?

    A make-or-buy decision happens when a company must choose to either manufacture an item itself, or buy it premade from a supplier.
  8. Technical Indicators

    Key Financial Ratios to Analyze Investment Banks

    Find out which financial ratios are most useful when analyzing an investment bank, and why tracking capital efficiency is especially important.
  9. Fundamental Analysis

    Understanding the Internal Rate of Return Rule

    The internal rate of return rule is a popular method used to compare investments or projects.
  10. Term

    How Equity Capital Markets Work

    An equity capital market is a market existing between companies and financial institutions that raises money for the companies.
RELATED FAQS
  1. What is property, plant and equipment, and what does it mean?

    Property, plant and equipment (PP&E) is a term that describes an account on the balance sheet. The PP&E account ... Read Full Answer >>
  2. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  3. Do you discount working capital in net present value (NPV)?

    Net present value (NPV) calculations should include the discounted value of changes in working capital. This treatment of ... Read Full Answer >>
  4. How is working capital different from fixed capital?

    There are several key differences between working capital and fixed capital. Most importantly, these two forms of capital ... Read Full Answer >>
  5. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  6. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center