My question comes from these sentences,

Research has also found that the impact of ICT capital is greater in an organization when there are higher levels of investment in intangible capital. This includes R&D, firm-specific human capital, and organizational structures.

The Cambridge Dictionary definition of "capital"

money and possessions, especially a large amount of money used for producing more wealth or for starting a new business:

and the definition of "asset"

something valuable belonging to a person or organization that can be used for the payment of debts: A company's assets can consist of cash, investments, specialist knowledge, or copyright material.

Definition of "asset" in Macmillan Dictionary

something such as money or property that a person or company owns

Definition of "investment" in Cambridge Dictionary

the act of putting money or effort into something to make a profit or achieve a result

Reading all these makes me feel investment is money you put into a company or project; asset is something of value that's in there already. But capital seems to mean both? And in my sample sentences, they are almost interchangeable (except for human capital, this one I have no doubt about)?

1 Answer 1


These are specialized, field-specific terms from finance, accounting, and economics, and may have very specific definitions in some contexts (particularly accounting). I'll give you the general flavor, though.

Capital is generally a means to producing something else. For the most part, this word is used from the perspective of a business. Its capital consists of all of its resources (buildings, machines, patents, cash, etc.) that are used in the course of business. If the business has some wealth set aside but not likely to be used in the course of its business, it is less likely to be considered capital. When we use the term human capital, we are thinking of a person like a business. The skills, experience, and qualifications of a person are valuable tools that make their time worth something on the job market. The main message conveyed by the use of the word "capital" that it is a tool used to create wealth.

An asset is a more general term. It is anything that has value. There are real assets, which are physical or intellectual property that have value and can be sold. If they are being used to produce something, they may also be considered capital, but this is not necessary. There are also financial assets, which are things like stocks and bonds. These do not directly produce any real wealth. Instead they are contracts that entitle the owner to a stream of cash flows. It is not necessary that an asset be expected to make more money than it originally cost. The word "asset" conveys the idea that something is valuable and could probably be sold if you wanted to.

The meaning of the word investment depends on the context but generally means spending money in order to make more money. When a business purchases some new capital, that is considered an investment because it expects that capital to pay for itself in the future. An individual or financial intermediary is likely to make an investment by purchasing a financial asset (stock, bond, option, etc.). The word "investment" conveys the idea of sacrificing wealth today in order to have more wealth in the future.

There is plenty of overlap in these terms. A business investment may be capital, and some people may call it a business asset. An individual may make an investment, which is very likely to be considered an asset, but not capital.

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