Capital Decay

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DEFINITION of 'Capital Decay'

An economic term denoting the amount of revenue that is lost by a company due to obsolete technology or outdated business practices. Capital decay is a growing problem for firms, as the rate of technological development continues to increase. This financial malady can cause firms without current technology to struggle to keep up with competitors.

INVESTOPEDIA EXPLAINS 'Capital Decay'

Capital decay was the boon of many firms in the early twentieth century, when modern production methods first came into use. When Henry Ford began to employ the assembly line for car production, firms that used the same employee to build an entire car suffered from capital decay and either went out of business or sold out to Ford or another competitor.

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