Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which term describes existing capital investments?

1. Debt capital

2. Equity capital

3. Working capital

4. Operating capital

The correct answer is: Equity capital

The term that describes existing capital investments is equity capital. This refers to the ownership interest in a business, usually in the form of stocks or shares that represent an investment made into the company by its owners or shareholders. Equity capital is a critical aspect of a business's financial structure as it indicates how much of the company's assets are financed through ownership, thereby reflecting the existing investments made into the company. In contrast, debt capital represents borrowed funds that must be repaid over time, which does not reflect existing investments but rather liabilities. Working capital refers to the difference between a company's current assets and current liabilities, focusing on the liquidity available for daily operations rather than highlighting existing investments. Operating capital pertains to the funds necessary for the everyday operations of a business, which may also relate closely to working capital but isn't necessarily tied directly to ownership investments. Thus, equity capital is the most accurate term to describe existing capital investments in a business.