capital formation

Capital formation

Expansion of capital or capital goods through savings, which leads to economic growth.

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Capital Formation

The transfer of capital from individuals, organizations, or government for business use. For example, a widget company experiences capital formation when people buy widgets. The company can then use the profit to encourage investment or to expand its operations, among other options. Capital formation is crucial to economic growth.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

capital formation

The creation of productive assets that expand an economy's capacity to produce goods and services. Private savings facilitates capital formation by allowing resources to be diverted to corporate investment rather than individual consumption.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

capital formation

or

capital accumulation

1. the process of increasing the internally available CAPITAL of a business by retaining earnings to add to RESERVES.
2. the process of adding to the net physical CAPITAL STOCK of an economy as a means of increasing the economy's capacity to produce goods and services. INVESTMENT by businesses in new plant and equipment is one important source of capital formation, as is investment by the government in INFRASTRUCTURE (roads, railways, etc.).

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

capital formation

see CAPITAL ACCUMULATION.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005