What is an equity investment?

A capital investment is the acquisition of a fixed asset that is expected to have a long useful life before it needs to be replaced or repaired. Two of the most easily recognizable examples of capital investments are land and buildings. However, an equity investment is made each time a company acquires assets that will benefit the operation of the business but will not be used to cover the operating costs of the business.

Of course, an equity investment need not be an equipment or land-type asset. An equity investment can be as simple as an amount of money that is set aside in some sort of interest-bearing account. As the proceeds are not being used to cover business expenses, capital goods of this type can be used freely to generate additional income through the accrual of interest. Therefore, it would be appropriate to consider an initial amount of money used to open a standard savings account as a capital asset, with the fact that each year you will be charged an interest rate on the principal that converts the asset into investment capital.

Many people think that in order to qualify as an equity investment identification, the asset must be an item of high initial value. In fact, fixed assets can have any kind of inherent value. The main feature of an equity investment is not the achievement of some basic present value, but the fact that the item is not required for normal expenses associated with daily life or business operation. Even the component of holding some sort of interest is not necessarily a qualification to be understood as a capital investment. Money kept in a piggy bank or under a mattress would still qualify as a capital investment, as the money is expected to (a) have a long shelf life and (b) not be needed to maintain day-to-day operations. the day-to-day of a company or house.

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