Next video:
Loading the player...

Capital goods are assets with a useful life of more than one year that are used for the production of income.  Capital good and capital asset refer to the same type of asset -- the context determines which one is used.  When the term “capital good” is used, it is usually in the context of economic analysis of the level of capital goods purchased and used in the total economy. “Capital asset” is a term most often used in accounting and finance to refer to a company’s long-term assets.

In economics, a capital good is any type of asset that is used to produce other goods, or helps in performing services that the company sells to others.  This includes buildings, factories, automobiles, airplanes, trucks, furniture, computers, and machines used in manufacturing, just to name a few.  Often, the manufacturing process for a capital good is so extensive that it is produced by an amalgamation of various manufacturers. 

Economists and investors monitor the level of capital goods purchases. Companies are more likely to purchase capital goods if they forecast an increase in future demand for their products.  So if there is an increase in overall capital goods purchases, it could be a leading indicator that the economy is about to grow. 

Some of the best-known capital goods producers are Boeing, International Harvester, Mack Trucks and General Dynamics.

Related Articles
  1. 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.
  2. Investing

    Explaining Capital Employed

    Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue.
  3. Small Business

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  4. 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.
  5. 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 ...
  6. Investing

    Understanding Capital And Financial Accounts In The Balance Of Payments

    The current, capital and financial accounts compose a nation's balance of payments.
  7. Small Business

    Capital Expenditures (CAPEX)

    Learn more about what it costs to produce goods.
  8. Insights

    What are Consumer Goods?

    Products that are purchased for consumption by the average consumer. Clothing, food, automobiles and jewelry are all examples of consumer goods
  9. Small Business

    Retail vs. Tech: How These Companies Use Working Capital

    Learn about the difference between retail and tech businesses' use of working capital and why working capital varies so widely in the technology sector.
  10. Investing

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
Hot Definitions
  1. Salvage Value

    The estimated value that an asset will realize upon its sale at the end of its useful life. The value is used in accounting ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  4. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
Trading Center