Net Capital Formation

Net Capital Formation

The transfer of capital from individuals, organizations, or governments for business use after deductions for depreciation. For example, a widget company experiences capital formation when people buy widgets. It calculates its net capital formation by deducting the depreciation on its widget-manufacturing equipment.
References in periodicals archive ?
A country in which gross capital formation is equal to calculated depreciation and therefore results in no net capital formation would nevertheless reap economic growth from the substitution of new technology for old.
A large part of the blame for the low rate of net capital formation during the 1973-89 period is placed on the relatively low return on capital.