Capital resources are assets used in the production of goods or services, including machinery, support equipment, buildings, warehouses, and support structures. Cash is not considered a capital resource as it is used to acquire them.
Capital resources are understood to include assets that are used in the process of producing goods or services as part of a business operation. Although the range of assets that can be included in this category is very broad, it is important to note that not all assets are capital resources. There are some basic qualifications that govern which assets can properly be referred to by this term.
One of the basic criteria for an asset to be considered a capital resource relates to the long-term use of the asset in the production of goods and services. In general, it will be anticipated that it will assist in the creation of products for an extended period of time. Machinery manufacturing is a prime example, as is the support equipment used to keep machinery in good working order. In fact, the building that houses the machinery will also qualify as a capital resource.
This type of resource can also be defined as something that helps in the storage of finished products, awaiting their sale and shipment to customers. For this reason, a warehouse will be considered a capital resource, especially if the manufacturer owns the space. You can also include support structures that help in the force or power necessary to drive the machines used in production. Dams that help generate power for the factory’s operation also meet the basic criteria.
One important asset that is not generally considered a capital resource is cold, hard cash. Money, in almost any form, cannot be considered part of this category. This is because currency is the means that enables the acquisition of a capital resource, rather than being the proper resource. While money is necessary for the function of any business, currency does not directly result in the production of goods and services. Furthermore, the money cannot be used to provide force or power to the machinery that actually produces the finished products.
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