Capital Investment

Reviewed byDheeraj Vaidya, CFA, FRM

Capital Investment Definition

Capital investment refers to any sum of money usually provided to a company to help it achieve and further its business objective. The term may also refer to long-term acquisition by the business, such as real estate, machinery, industries, etc.

Types of Capital Investment

Usually, capital investments that are undertaken may fall under two broad categories:

Example of Capital Investment

Mr. Smith wants to set up an FMCGFMCGFast-moving consumer goods (FMCG) are non-durable consumer goods that sell like hotcakes as they usually come with a low price and high usability. Their examples include toothpaste, ready-to-make food, soap, cookie, notebook, chocolate, more trading business. He goes on to appropriate his budget towards the following items. Commercial space $150000, Storage 15000$, Inventory 5000$, Vehicles-20000$, Amount borrowed-25000$. Calculate Mr. Smith’s total capital investment.

The total capital investment of Mr. Smith towards his establishment can be calculated as follows: –

Capital Investment Example 1
  • Total Capital Investment = 215000

Advantages of Capital Investment

Disadvantages of Capital Investment


  • Capital investment, no doubt, would boost the economy, but one wrong move into a bad venture or into the purchase of inappropriate assets that do not value-adding may erode the wealth of the capital contributor.


Capital investment, no doubt, stands to be a good economic booster by being a value-adding catalyst and creating jobs for the people of the country to provide goods and services to meet the demands of the public and better their living standards. However, there is no doubt that there is significant exposure to risk and the necessary scrutiny by all the stakeholders.

However, suppose an environment is created that is business-friendly, allows more investors to pump in money, and provides capital to move freely into the right ventures. Moreover, ensuring they are efficiently managed may help them steer the business towards success for the benefit of all the stakeholders and society.

This article is a guide to what Capital Investment is and its definition. Here, we discuss capital investment examples and their types, advantages, disadvantages, and limitations. You can learn more about finance from the following articles: –

Reader Interactions


  1. Augustine zibuka says

    an exciting explanation of the capital investment cons and pros.

    • Dheeraj Vaidya says

      Thanks for your kind words!

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