Capital Base
The term "capital base" has various connotations in the finance world, but, in general, it refers to a base level of funding. For those companies who just went public in an initial public offering, for example, the capital base is the money acquired from the offering, plus any accumulated earnings made through regular sales.
Banks provide a particularly nuanced case. For banks, their capital base is their assets minus their liabilities. Simple enough. They are required to keep a certain amount of capital on hand in order to make loans and service their customers.
But sometimes the value of the collateral backing up a bank's loans goes down, threatening the amount of the capital base. For example, the value of local real estate may have tanked or interest rates may have gone way up. As a result, the amount being paid back on loans is less than the amount the bank needs. The bank will have to raise funds by issuing bonds, reducing expenses or increasing their assets.
"Capital base" also refers to opening an account in a brokerage firm. Your capital base is the money you put into your account in order to purchase securities. Future contributions to the account add to your capital base (as does any profits you make on your investments).
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Finance: What is working capital?268 Views
finance a la shmoop. what is working capital? alright people say we're opening
a lemonade stand. I seed what you did there. unfortunately we can't just blink [man stands in front of stage]
our eyes like Aladdin's genie and you know make it all happen. magically we
don't need a ton of money to start things but we need some money in advance. [genie comes out of lamp]
of you know when we begin collecting revenues well we have to rent a location,
and pay six months rent in advance, and we got to buy about 87 pounds of
sugar and 4,000 lemons and hundred fourteen huge bottles of purified water,
oh and cups we need eight thousand cups. all told it costs about 50 grand in
capital, working capital. see we did there, we need before we can start to run the
business, and you know pay employees and so on .so we get an investor TBOG. the [people stand in line for lemonade]
bank of Grandma. yeah we love her. she gives us a hundred grand. well that
entire hundred grand invested into our little business is our total working
capital. right? fifty grand and start the business working and we got 50 left over
or just in case things don't start up as quick as we hope .its capital that lets
us start working. in cleverly named there. all right well 50 grand we know we're
gonna spend 50 grand and cover the time in between when we're up and running and [calendar]
revenues and all the other stuff start to kick in. and well yeah it's that
simple. put together an actual drinkable lemonade recipe ?well that's just a
little bit harder. working capital. live it love it breathe it. [ grandma grimaces]
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