Capital Decay

AAA

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An economic term denoting the amount of revenue that is lost by a company due to obsolete technology or outdated business practices.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.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Competition-Driven Pricing

    A method of pricing in which the seller makes a decision based ...
  3. Cash Flow Statement

    One of the quarterly financial reports any publicly traded company ...
  4. Revenue Deficit

    When the net amount received (revenues less expenditures) falls ...
  5. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
  6. Administrative Order On Consent ...

    An agreement between an individual or business and a regulatory ...
Related Articles
  1. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  2. Bonds & Fixed Income

    Understanding Capital And Financial Accounts In The Balance Of Payments

    The current, capital and financial accounts compose a nation's balance of payments.
  3. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  6. Economics

    What is a roll-up merger and why does it occur?

    Find out what a roll-up merger is and how it is executed. See why roll-ups might bring added efficiency and competition into a fragmented market.
  7. Taxes

    What is the best method of calculating depreciation for tax reporting purposes?

    Learn the best method for calculating depreciation for tax reporting purposes according to generally accepted accounting principles, or GAAP.
  8. Fundamental Analysis

    Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total debt collateral.
  9. Economics

    What are the differences between internal and external economies of scale?

    Take a deeper look at the differences between internal and external economies of scale, and learn why internal economies offer more competitive advantage.
  10. Economics

    How does marginal cost of production relate to economies of scale?

    See how marginal cost of production relates to economies of scale, and why every company should be concerned with reducing its marginal costs.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center