Capital Resources: Types and Examples

Capital resources are assets for the production of goods or services as part of a commercial operation. Although there’s a wide range of other assets such as human and natural resources that can be used, it’s vital to recognize that not all assets are capital resources. There are a few fundamental components that control which assets can be correctly referred to by this word.

In this article, we’ll look at the components and examples of capital, human and natural resources and how they influence a country’s economic activities

Overview

A lot of distinct processes are necessary to get at the final output in the normal course of business. Therefore, it’s critical to remember that the main course of operations is primarily; INPUT, PROCESSING, and OUTPUT.

Value addition is the process through which a firm ‘processes’ its inputs, which is the very reason for the company’s existence anyway. Since capital tends to be a distinct feature between inputs and outputs, most processing is done with it.

As a result, capital resources are manmade resources that a corporation arranges to function. Although the corporation may have a variety of various types of capital, it’s evident that these resources are united to produce a holistic result.

Types of Capital Resources

Out of many resources accessible by corporations, below are the most vital of all:

• Financial Capital: Financial capital is primarily necessary to ensure the company’s operations and performance following the company’s requirements. Running finance is an example of how to pay for day-to-day operating expenses. In the same way, financial capital refers to the funds needed to purchase real estate or machinery.
• Human Capital: Human capital refers to the human resources required to operate machines and other non-human capital assets. Companies are unlikely to succeed without adequate human capital resources.
• Man-Made Capital: Man-made capital refers to machines and other equipment that companies require to expedite their production process.

Capital Resources Meaning

Capital resources refer to any asset, tool, piece of equipment, or housing facility that a business uses in the production of goods. To be called a capital resource, resources must possess a few critical characteristics. They have to:

• Be a part of the manufacturing process and essential to the production of a product.
• To last for a long period. This time frame will vary depending on the resource’s lifespan, however, it may not be used only once.
• Be created by humans. Capital resources include the tools and machines utilized in the manufacturing process. These items, regardless of the type of item they’re used to manufacture, fit all three criteria: they are man-made, necessary for the manufacturing process, and may be used repeatedly throughout time.

Office buildings, manufacturing facilities, and machinery, in general, are examples of capital resources. When capital resources investment rises, the economy benefits because it means that productive output will rise as well, resulting in more jobs and an overall improvement in the economy.

What Are Human Capital Resources?

As hinted earlier, human capital resources refer to people’s talents, habits, and other characteristics. In other words, the characteristics that lead to the final economic output. Education, training, intelligence, skills, health, and other qualities that the employer appreciates, like punctuality and interpersonal skills, are examples of human capital resources.

Furthermore, a  worker’s communication skills, for example, could be excellent. After years of dealing with thousands of clients, the worker’s abilities would’ve improved, and he or she would’ve learned new and more effective ways to deal with all types of consumers.

Human capital isn’t visible, and its worth can’t be calculated. Nonetheless, it’s critical to a company’s long-term success. A worker who has never used a computer before, for example, is unlikely to be as productive in an office setting as someone who has. Computing abilities are classified as part of human capital in this case. As a result, a company could choose to invest in getting such a worker up to speed with the required training.

It’s tough to quantify an employee’s talent, competence, or personality, which is why the interview process is so crucial. It considers the employee’s skill set, experience, and education, as well as their human capital. In other words, human capital is a measure of an individual’s economic worth in a specific field.

Examples of Human Capital Resources Explained.

Having mentioned some of the examples of human capital resources, we went further to explain each of them according to their importance.

#1. Abilities

Ability can be thought of in two ways: natural and developed. The qualities we have when we are born are referred to as natural abilities. Tiger Woods, for example, is well-known for his exceptional skills in Golf. This was apparent at a young age and can be classified as human capital.

He has amassed a fortune thanks to his innate skill. However, this capacity requires hard work, a positive mindset, and nourishment. This is how a natural ability becomes a developed ability and, as a result, a competitive advantage.

#2. Education

This is the area in which Human Capital Theory concentrates the most. The ability to learn and convey knowledge has increased as more people have learned to read and write. The capacity to read and write, for example, allows us to use the internet to learn new talents.

However, education encompasses more than just reading and writing. It also entails the improvement of our analytical skills. History, for example, necessitates the development of writing skills, whereas science necessitates the development of inquiry and investigation skills

#3. Creativity

It is possible to claim that creativity is not always something that can be learned. It could even be termed a natural talent. Some people are born with more creativity than others. As a result, certain people may be more productive in creative professions than others.

#4. Judgment

Judgment is one of the examples of human capital resources that relate to the decisions people make in various situations. In some ways, this is understandable. Judgment, on the other hand, could be improved. Making a judgment call on a yearly project, for instance, could be better if the employee has dealt with similar situations before.

#5. Experience

We get better at reacting the following time we have more experience. Someone who has repaired hundreds of electrical devices, for example, is better than someone who has not.

The idea is that the more life experiences we have, the more circumstances we are exposed to. As a result, a mechanic with expertise working with various types of units is significantly more capable. When they gather, they can draw on their past experiences to help them deal with a crisis.

Natural Resources

Natural resources are any natural substances that humans utilize. To put it another way, natural resources are elements or materials that have formed naturally and are manipulable by humans.

Natural resources, like human and capital resources, have a significant influence on economic output. They are available in their natural state and can be used as raw materials to manufacture a wide range of products. Natural resources are renewable and non-renewable. Sunlight, water, plants, animals, soil, and air are examples of renewable natural resources. Whereas non-renewable natural resources include oil, metals, iron, clay, and other minerals. 

Land use patterns are formed by the closeness of natural resources to a specific culture. Because of the fertile soil in the Midwest, for example, intensive agriculture has emerged. Furthermore, Saudi Arabia has specialized in oil extraction due to easy access to oil reservoirs.

How Do Human, Natural, and Capital Resources Influence a Nation’s Economy?

Economic activities require human(operator) capital(machinery) and natural(soil) resources. Let us take a look.

#1. Capital Resources

These are essential products that are necessary for economic activity to begin and function. Among the capital, resources are funds for investments, as well as infrastructures such as electricity, roads, and schools. In addition, technological instruments and machines enable businesses to be more productive and profitable.

Since the industrial revolution, the majority of capital resources have been concentrated in Europe and North America. Companies from these countries have then invested a portion of their capital in emerging countries, primarily in the establishment of facilities for extracting human and natural resources.

In various Asian countries, capital has been invested. Some countries developed rapidly and became major exporters of manufactured goods. China, for example, has amassed capital resources and has invested in many countries around the world over the previous two decades, making the Chinese economy a stable one today, as we all know.

#2. Human Resources

Human resources have an impact on economic development and the establishment of new economic activities, such as the technology industry. The majority of the technology businesses focus on industrialized countries with highly capable individuals. However, because labor costs in nations such as North America, Japan, and Europe are so expensive, many things are produced elsewhere to keep prices down.

According to records, throughout the 1980s and 1990s, low wages in places such as China and India drew industrial activity, causing these countries to become significant makers of many types of commodities, causing their economies to rise rapidly. Nevertheless, poor wages kept poverty and exploitation at high levels.

#3. Natural resources

Natural resources are abundant in most territories, such as Latin America and Africa, but are few in regions such as Europe and Japan, where they’re constantly in demand. As a result, several developing countries have specialized in mining, and their economies rely heavily on the natural resources they export. However, due to a lack of manufacturing industries, they must import completed items such as automobiles and telephones.

On the other hand, most industrialized nations have industrial and service-based economies and can afford to import the natural resources they require. The United States, for example, is an industrialized country with rich natural resources, allowing for a diverse economy.

What are two types of capital resources?

Capital resources can be divided into three categories: physical capital resources (e.g., machinery, tools), human capital resources (e.g., knowledge or skills provided by employees), and intellectual capital resources (shared information among employees).

Is cash a capital resource?

Since money is not a machine, piece of equipment, or tool utilized in manufacturing, it is not considered a capital resource. Money facilitates trade because it serves as a means of exchange rather than a means of production.

Is food a capital resource?

Buildings, equipment, and tools are examples of capital goods. Food, appliances, clothing, and automobiles are a few examples of consumer products.

Is time a capital resource?

Manpower, raw materials, time, and – the subject of this course – capital resources are among the resources employed, and their variety is equal to that of the items themselves.

What is capital and its sources?

Any asset a company holds that helps it create money is referred to as capital in the business sector. Cash, cash equivalents, and marketable securities are examples of financial assets that can be used as sources of capital. tangible resources like the equipment and facilities utilized to produce a product.

Is water a capital resource?

Water, air, trees, minerals, and animals are a few examples of natural resources. The tools and machinery created by humans are called capital resources.

Is human a capital resource?

The term “human capital” refers to the financial worth of a worker’s education and training. Employers prioritize traits like loyalty and timeliness in their employees, as well as assets like education, training, intelligence, talents, and health.

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FAQs On Capital Resources