What is 'Capital Risk'

1. The risk an investor faces that he or she may lose all or part of the principal amount invested.

2. The risk a company faces that it may lose value on its capital. The capital of a company can include equipment, factories and liquid securities.

BREAKING DOWN 'Capital Risk'

1. For example, when someone invests $10,000 into the stock market, he or she faces a capital risk on the $10,000 invested.

2. If a company does not insure the value of some of its assets, it will face capital risk from such things as fire, flood and theft.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Capital Investment

    Funds invested in a firm or enterprise for the purposes of furthering ...
  3. Losing Your Shirt

    In the investment world, this expression is used to describe ...
  4. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
  5. Above Par

    A term used to describe the price of a security when it is trading ...
  6. Capital Markets

    Capital markets are markets for buying and selling equity and ...
Related Articles
  1. Small Business

    Understanding Capital

    Capital has a variety of meanings, but it generally refers to financial resources.
  2. Small Business

    Understanding Capital Investment

    Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business.
  3. Investing

    Understanding Face Value

    Face value is the dollar value stated on a security.
  4. Investing

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  5. Investing

    Financial Markets: Capital Vs. Money Markets

    Two commonly used components of the financial market are money markets and capital markets. Find out the similarities and differences between them.
  6. Insights

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  7. Small Business

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  8. Investing

    Advantages of Maintaining Low Working Capital

    Understand the benefits and advantages of maintaining low working capital as related to liquidity needs, capital allocation and operational efficiency.
  9. Insights

    What is Liquidity Risk?

    Liquidity risk is the risk of being unable to sell an asset fast enough to avoid loss.
  10. Managing Wealth

    Understanding Capital Gains

    Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more ...
RELATED FAQS
  1. What is face value and how is it determined?

    Face value is determined arbitrarily by issuers and designed to give a reasonable expectation of value to the stock, bond ... Read Answer >>
  2. What is the difference between financial capital and economic capital?

    Read about the differences between types of financial capital, which companies use to raise money, and economic capital models ... Read Answer >>
  3. How does total capital investment influence economic growth?

    Discover the basic relationship between capital investment and economic growth, and why improving the capital structure increases ... Read Answer >>
  4. How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change ... Read Answer >>
  5. What does a high capital employed imply about risk?

    Learn what capital employed indicates about a company's operational risk level, and how the return on capital employed can ... Read Answer >>
  6. What is the lowest capitalization rate before an investment becomes unprofitable?

    Learn about different levels of profitability associated with investments featuring similar capitalization rates. Explore ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center