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. Consumer Goods Sector

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

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

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

    Relates to a type of business that typically carries a high capital ...
  5. Capital Expenditure - CAPEX

    Funds used by a company to acquire or upgrade physical assets ...
  6. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
Related Articles
  1. Fundamental Analysis

    Does gross profit include tax?

    Find out what gross profits are, how they are calculated, how they are interpreted by investors and whether taxes are taken into consideration.
  2. Investing Basics

    Reading The Balance Sheet

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

    Advanced Financial Statement Analysis

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

    Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional businesses.
  5. Fundamental Analysis

    What is the difference between operating cash flow and net income?

    Learn how net income is an income statement for a certain period of time, while cash flow shows inflows and outflows based on conversion of sales into cash.
  6. Fundamental Analysis

    How do I calculate dividend payout ratio from a balance sheet?

    Understand what the dividend payout ratio indicates and learn how it can be calculated using the figures from a company's balance sheet statement.
  7. Credit & Loans

    When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling or trading.
  8. Fundamental Analysis

    Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to receive them from banks.
  9. Investing Basics

    What is the difference between tangible and intangible assets?

    Discover the difference between tangible assets and intangible assets and the types of assets that are in each. Additionally, learn where these are recorded.
  10. Fundamental Analysis

    What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between the two terms.

You May Also Like

Hot Definitions
  1. 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 ...
  2. 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 ...
  3. Weather Insurance

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

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

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center