What is financial Capital?

What is financial Capital?

Definition: Financial capital is a much broader term than economic capital. In a sense, anything can be a form of financial capital as long as it has a money value and is used in the search of future revenue. Most investors encounter financial capital with respect to debt and equity.
Direct investment in a business is referred to as equity. When someone contributes Rs.1500000 to a business in the hopes of receiving a portion of future profits, he increases its equity capital by Rs.500000. Corporations issue stocks, or shares of company ownership, in exchange for additional equity. Equity capital is not typically accompanied by a guarantee of future returns.
Sometimes a business decides to finance its activities through debt instead of equity. Debt capital does not dilute ownership and does not entitle the creditor to a proportional share of future profits. However, debt represents a legal claim on the assets of the borrowing company and is considered riskier that equity capital. Companies that cannot repay their creditors have to file bankruptcy.