Capital Goods

AAA

DEFINITION of 'Capital Goods'

1. Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production process.

2. The sector of the economy that includes capital-goods-producing businesses such as Boeing, Caterpillar and Lockheed Martin. Aerospace, defense, construction and machinery businesses make up most of the capital goods sector.

INVESTOPEDIA EXPLAINS 'Capital Goods'

Capital goods represent a major expense for businesses. However, capital goods that a business does not use up in a single year of production cannot be entirely deducted as business expenses in the year they are purchased. Instead, they must be depreciated over their useful lives, meaning that the business takes a partial tax deduction for the item for each year that the capital good is in use.

RELATED TERMS
  1. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
  2. Consumer Goods Sector

    A category of stocks and companies that relate to items purchased ...
  3. Capital Formation

    A term used to describe net capital accumulation during an accounting ...
  4. Disinvestment

    1. The action of an organization or government selling or liquidating ...
  5. Heavy Industry

    Relates to a type of business that typically carries a high capital ...
  6. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
RELATED FAQS
  1. How do different economic schools of thought treat the factors of production?

    Most economic schools identify the same types of factors of production: land, labor, capital and entrepreneurship (intellectual ... Read Full Answer >>
  2. What determines labor productivity?

    Labor productivity is the rate of output per worker within a specified unit of time. Economists and statisticians track labor ... Read Full Answer >>
  3. What factors cause shifts in aggregate demand?

    Aggregate demand, or AD, is defined as the total amount of goods and services consumers are willing to purchase in a given ... Read Full Answer >>
  4. What is the Austrian Theory of the Business Cycle?

    One of the more popular explanations of the financial crisis of 2008 – especially among libertarian and other anti-interventionist ... Read Full Answer >>
  5. What distinguishes the financial services sector from the banks?

    Banking is a subset of the financial services sector, although not all bank services are strictly defined as financial services. ... Read Full Answer >>
  6. Does gross profit include tax?

    Gross profit, the accounting term used to represent the profitability of a production process, is one of the three profit ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  3. Economics

    What is Value Added?

    Value added is used to describe instances where a firm takes a product and adds a feature that gives customers a greater sense of value.
  4. Economics

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.
  5. Economics

    What is the Breakeven Point?

    In general, when gains or revenue earned equals the money spent to earn the gains or revenue, you’ve hit the breakeven point.
  6. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  7. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  8. Investing

    What's Marginal Revenue?

    In microeconomics, marginal revenue is the additional revenue generated by increasing sales revenue by one unit. Another way of saying this is that the marginal revenue is the revenue generated ...
  9. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  10. Investing

    What is the Debt-To-Capital Ratio?

    The debt-to-capital ratio is used to measure a company’s use of financial leverage. The ratio is the company’s total debt, divided by the sum of the company’s equity plus total debt.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center