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Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business to help earn revenue.  This is in contrast to day-to-day expenditures.

An example of a capital investment is a new manufacturing machine to increase a company’s production capacity. Other types of capital investments include purchases of equipment, office buildings, and factories.  Capital investment can even include intangibles such as software or intellectual property. For a movie production company, purchasing the rights to a film is a capital investment.

Capital investments are normally infrequent purchases. They usually involve large dollar amounts, and are typically funded by an outside source such as angel investors, venture capital, bank loans, issuing stock equity, or issuance of corporate bonds.

The type of funding depends on a company’s stage of development.  A small start-up that needs a capital investment will look to angel investors and venture capital for ways to fund its capital investments. A more mature company that is not public will usually apply for a bank loan, or if that company is ready to go public, it will have an initial public offering (IPO).  Publicly traded companies usually fund their capital investments by issuing more stock or corporate bonds.

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