In economic terms, what does 'capital' often refer to?

In economics, 'capital' commonly refers to the machinery and equipment used for production. This definition encompasses tangible assets that contribute to the production process, enabling businesses to create goods and services more efficiently. These capital goods are distinct from other types of resources.

While available funds and raw materials are crucial to production, they fall into different categories: funds are finance resources, and raw materials are considered inputs rather than capital. Salaries paid to employees represent labor costs, which also do not fit the traditional definition of capital. Understanding capital as essential machinery and equipment helps to clarify its role as a critical component in producing economic value and enabling businesses to operate effectively.