What is capital, and why is it important? Capital generally refers to financial assets or resources that can be invested in the production of goods and services. This includes physical capital such as machinery, buildings, and equipment, as well as financial capital such as cash, stocks, and bonds. Capital is important because it allows businesses to invest in new technology, expand production capacity, hire additional workers, and take on new projects. This can lead to increased productivity, higher levels of output, and greater economic growth. In addition, capital can help businesses weather periods of economic downturns or other unexpected events, by providing a buffer against financial losses. On a larger scale, capital is also important for the overall health and growth of the economy. In order for businesses to invest in new projects and expand their operations, they need access to capital markets where they can raise funds. This, in turn, can stimulate economic activity and create new job opportunities. Therefore, the availability of capital is seen as a key driver of economic growth and prosperity.