Think about a factory. For real though...close your eyes and conjure the sight of a factory in your mind. Smokestacks, loading docks, maybe a railroad spur, machines all around, churning and chugging, doing whatever, big trucks and forklifts driving around.
All that stuff represents the physical capital of the manufacturer. In general terms, the phrase refers to the actual stuff a company needs to do what it does. So...the buildings everyone works in, the machinery that churns out the products, the means of transporting stuff from here to there. It also includes things like laptops and filing cabinets and coffee machines.
Physical capital is considered one of the Big Three factors of production, along with land and labor. (The basic economic theory names three factors of production...though other descriptions include four or even up to seven factors.)
Related or Semi-related Video
![Finance: What is an Asset Backed Security?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.497_770x433.jpg)
Finance: What is an Asset Backed Securit...7 Views
Finance Allah Shmoop what is an asset backed security Well
if you haven't seen our M night channel on directed
video on Collateral you should It won the Academy Award
for best finance video frequently confused with a Tom Cruise
action flick Riveting stuff So why would you see this
or other videos while other than to see Cem truly
groundbreaking CG effects like this Because assets backing a security
our collateral that is the asset itself is the guarantee
that bond holders get if the money isn't paid back
or said differently The bonds borrowed against the assets function
as the collateral in the loan funding whatever a B
s security is being offered You have an airplane or
actually one hundred of them together they're worth two billion
box bonds were issued to buy them two billion bucks
worth of bonds BBB The planes are going to be
incorporated into SHMOOP West Airlines flight schedule Only problem Shmoop
West doesn't have the collateral or the cash Ola to
just you know by them But shmoop West Air can
lease them or pay interest on them for the privilege
of using them And that's a good thing because well
eBay airlines just happens to own a bunch of used
airplanes So what happens then Well the owner of the
airplanes pledges them as collateral and raises cash ola money
in the form of bonds by borrowing against the assets
of the airplane The asset of the airplane is the
guarantee that backs the bond Should something up you know
go awry So uh yeah On behalf of everyone here
it's shmoop West Air We'd like to wish you a
safe ish flight Peanuts
Up Next
What is a Hard Asset? A hard asset is a specific type of asset listed on a company’s balance sheet. It is an actual physical piece of property th...