Capital Types, Legal Business Forms and Economic Sectors

Factor Capital

Factor capital: Economists use this term to denote a set of items such as machinery, computers, raw materials, etc., directly involved in the preparation and production of goods and services. It includes both fixed and circulating elements of the production process.

Fixed Capital

Fixed capital: Includes all elements that remain in the company for a long period of time and participate in various production processes, such as machinery and computers. These assets are the permanent element of the production process for goods and services.

• Examples: Industrial machinery, production equipment, computer systems.

Working Capital

Working capital (circulating capital): This refers to elements with a duration of less than one year. It basically comprises raw materials, inventories (stocks), and the energy consumed during production.

• Examples: Raw materials, intermediate goods, consumable supplies, energy used in production.

Legal Business Forms

Legal classification of societies:

General Partnership

General Partnership: A partnership with unlimited liability in which members contribute labor and capital. This corresponds to small businesses where labor often constitutes the bulk of value added and capital investment is scarce.

Limited Partnership

Limited Partnership: A joint venture in which there are general partners with unlimited liability and limited partners who only provide capital, their liability being limited to that contribution.

Corporation

Corporation: A limited liability company of capitalist character. The capital is divided into shares. This feature allows for expansion and growth. Large firms often belong to this type of legal entity.

Limited Company

Limited Company: A limited liability company with a capitalist character in which capital is divided into shares. Unlike some corporations, to retain control among partners these companies often limit the free transferability of shares, which gives this type of society a more familiar or family-oriented character than a corporation.

Cooperative Society

Cooperative Society: A social-interest organization created to allow workers to take ownership of and control the company. Cooperatives operate under principles of democratic governance and voluntary membership. They are often limited in scale or scope.

The Economic Sectors

The economic sectors:

Primary Sector

Primary sector: Includes activities related to nature, such as agriculture and livestock.

Secondary Sector

Secondary sector: Comprises all industrial activities and employment engaged in the transformation of productive factors into products, for example the textile and chemical industries.

Tertiary or Services Sector

Tertiary (services) sector: Includes activities and services that often support the operation of the primary and secondary sectors, such as health, education, and tourism.

The contribution of the three production sectors of a country, measured by GDP, is closely related to the level of economic development achieved.