Capital Flows

AAA

DEFINITION of 'Capital Flows'

The movement of money for the purpose of investment, trade or business production. Capital flows occur within corporations in the form of investment capital and capital spending on operations and research & development. On a larger scale, governments direct capital flows from tax receipts into programs and operations, and through trade with other nations and currencies. Individual investors direct savings and investment capital into securities like stocks, bonds and mutual funds.

INVESTOPEDIA EXPLAINS 'Capital Flows'

Capital flows are aggregated by the U.S. government and other organizations for the purpose of analysis, regulation and legislative efforts. Different sets of capital flows that are often studied include the following:

• Asset-class movements – measured as capital flows between cash, stocks, bonds, etc.
• Venture capital – investments in startup businesses
• Mutual fund flows – net cash additions or withdrawals from broad classes of funds
• Capital-spending budgets – examined at corporations as a sign of growth plans
• Federal budget – government spending plans

Capital flows can help to show the relative strength or weakness of capital markets, especially in contained environments like the stock market or the federal budget. Investors also look at the growth rate of certain capital flows, like venture capital and capital spending, to find any trends that might indicate future investment opportunities or risks.

RELATED TERMS
  1. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
  2. Capital Markets

    Markets for buying and selling equity and debt instruments. . ...
  3. Capital Outflow

    The movement of assets out of a country. Capital outflow is considered ...
  4. Money Supply

    The entire stock of currency and other liquid instruments in ...
  5. Venture Capital Funds

    An investment fund that manages money from investors seeking ...
  6. Capital Rationing

    The act of placing restrictions on the amount of new investments ...
RELATED FAQS
  1. How do government bailouts increase moral hazard?

    Government bailouts increase moral hazard by engendering a business climate in which companies feel they will be protected ... Read Full Answer >>
  2. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  3. How do you use a financial calculator to determine present value?

    Determining the present value of a given cash flow is based on the concept that money today is inherently worth more than ... Read Full Answer >>
  4. How are earmarks and pork barrel spending related?

    Both earmarks and pork barrel spending involve spending money on certain projects or specific events. Projects paid for by ... Read Full Answer >>
  5. What are the most effective ways to reduce moral hazard?

    There are a number of ways to reduce moral hazard, including the offering of incentives, policies to prevent immoral behavior ... Read Full Answer >>
  6. In what types of economies are regressive taxes common?

    Regressive taxation systems are more likely to be found in developing countries or emerging market economies than in the ... Read Full Answer >>
Related Articles
  1. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. 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.
  3. Investing

    Spotting Cash Cows

    We show you why some of these companies stand apart from the herd.
  4. Investing

    Earnings Cyclicality Exposes Profitable Trends

    Learn to explore a company's past profits to find today's opportunities.
  5. Economics

    Current Countries Under A Western Embargo

    We look at which countries the United States and European Union have imposed an imposed embargoes on and why.
  6. Economics

    How Changing Demographics Affects U.S Elections

    With the 2016 election upcoming, the change in two of the country's largest demographics will go a long way in determining who controls the White House.
  7. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  8. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  9. Economics

    How The GDP Of The US Is Calculated

    The US GDP may not be a perfect economic measure, but the ability to compare it to prior periods and other countries makes it the most applicable.
  10. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center