Capital Commitment


DEFINITION of 'Capital Commitment'

Future capital expenditures that a company has committed to spend on long-term assets over a period of time. Capital commitment also refers to securities inventory carried by a market maker. The term may also refer to investments in blind pool funds by venture capital investors, which they contribute over time when requested to do so by the fund manager.

BREAKING DOWN 'Capital Commitment'

A company has to exercise the utmost care in structuring its capital commitments, since an inordinately high amount will put undue strain on its finances. It would need to ensure that operating cash flow is sufficient to meet capital expenditures, and if it is not, make arrangements to ensure that it can raise the additional funds on the capital markets. Capital commitments are generally the highest for companies in capital-intensive industries such as power generation.

  1. Capital Expenditure (CAPEX)

    Capital expenditure, or CapEx, are funds used by a company to ...
  2. Advance Commitment

    A promise or agreement to take some future action. For example, ...
  3. Heavy Industry

    Relates to a type of business that typically carries a high capital ...
  4. Capital Intensive

    A business process or an industry that requires large amounts ...
  5. Capital Budgeting

    The process in which a business determines whether projects such ...
  6. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
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