Capital Recovery

AAA

DEFINITION of 'Capital Recovery'

1. The earning back of the initial funds put into an investment. Capital recovery must occur before a company can earn a profit on its investment.

2. A euphemism for debt collection. Capital recovery companies obtain overdue payments from individuals and businesses that have not paid their bills. Upon obtaining payment and remitting it to the company to which it is owed, the capital recovery company earns a fee for its services.

3. A company's recouping of the money it has invested in machinery and equipment through asset disposition and liquidation.

INVESTOPEDIA EXPLAINS 'Capital Recovery'

1. Initial cost, salvage value and projected revenues factor into a capital recovery analysis when a company is determining whether and at what cost to purchase an asset or invest in a new project.

2. A capital recovery company may specialize in collecting a particular type of debt, such as commercial debt, retail debt or healthcare debt.

3. If a company is going out of business and needs to liquidate its assets or has excess equipment that it needs to sell, it might hire a capital recovery company to appraise and auction off its assets. The company can use the cash from the auction to pay its creditors or to meet its ongoing capital requirements.

RELATED TERMS
  1. Business Recovery Risk

    A company's exposure to loss as a result of damage to its ability ...
  2. Recovery Property

    A specific class of depreciable real estate. Recovery property ...
  3. Modified Accelerated Cost Recovery ...

    The new accelerated cost recovery system, created after the release ...
  4. Accelerated Cost Recovery System ...

    A system of depreciation introduced by the Economic Recovery ...
  5. Global Recovery Rate

    A global measurement in the proportion of businesses that managed ...
  6. Cape Cod Method

    A method used to calculate loss reserves that uses weights proportional ...
RELATED FAQS
  1. How does the market share of a few companies affect the Herfindahl-Hirschman Index ...

    In economics and commercial law, the Herfindahl-Hirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >>
  2. What does the rule of 70 indicate about a country's future economic growth?

    The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >>
  3. How is the rule of 70 related to the growth rate of a variable?

    The rule of 70 is related to the growth rate of a variable because it uses the growth rate in its approximation of the number ... Read Full Answer >>
  4. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  5. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  6. What is the risk return tradeoff for bonds?

    Macaulay duration and modified duration are mainly used to calculate the durations of bonds. The Macaulay duration calculates ... Read Full Answer >>
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. Investing Basics

    The Working Capital Position

    Learn how to correctly analyze a company's liquidity and beat the average investor.
  3. Fundamental Analysis

    The Capital Asset Pricing Model: An Overview

    CAPM helps you determine what return you deserve for putting your money at risk.
  4. Fundamental Analysis

    Catch On To The CCAPM

    The consumption capital asset pricing model smoothes over some of CAPM's weaknesses to make sense of risk aversion.
  5. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  6. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  7. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  8. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.
  9. Investing

    How To Implement A Smart Beta Investing Strategy

    Smart beta investing is the notion of re-writing investment rules to improve investment outcomes by targeting exposures to intuitive ideas or factors.
  10. Economics

    Explaining Net Operating Profit After Tax

    Net operating profit after tax (NOPAT) describes a company’s potential cash earnings.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center