Capital Commitment

  

Categories: Investing, Banking, Stocks

This is when a company promises to spend future capital on a specific long-term asset for a certain amount of time. Commitments are tough. Like exercising every day. For. The. Rest. Of. Your. Life. Or showing up to work on time…forever.

But yes, even companies make commitments…Capital commitments get made when an expensive project is dilated 7 inches - i.e. just before its birth...because the process of raising a big project requires the commitment of banks, regulators, builders, managers, unions, and 50 other interested parties. Yes, it takes a village...

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Finance: What is a Current Asset?16 Views

00:00

Finance, a la shmoop. What is a current asset? Current yeah it's kind of a [Picture of a currant on a plant]

00:08

socialist raisin there, you know they all look about alike but that's a [Soldiers marching in front of Stalin with currants for heads]

00:12

currant and has nothing to do with current as cur-rent remember it like

00:18

your rent comes due soon, you rent a place for a year or less usually or at [Guy sticks his head out of pile of overdue bills]

00:24

least that's how long, you know lock in your rental rate. So if your [Someone signing a contract]

00:28

asset is current then it can be turned into cash within a year. That's how we

00:34

remember it here around Shmoop. Examples? A bond coming due in a year or less. [Bond document]

00:38

Companies store their cash all the time in short term paper like certificates of

00:43

deposit or Bank CDs which come due in less than a year. that's a current asset. [List of short-term paper]

00:49

And companies buy these kinds of bonds so they get a little more interest than

00:53

from their banks you know checking account. They buy stocks as well, shares [New interest rate is very small]

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of goog can be easily converted into cash quickly. Shares in Google are a [Current asset stamp]

01:01

current asset. Ounces of gold, yep easily a current asset. All right you get the

01:06

idea, so what's not current well fourteen thousand acres of solar panel land that [Huge fields full of solar panels]

01:11

your company owns. If you ever had to sell it while there are very few buyers

01:15

and it likely would take more than a year just to figure out all the [Calendars popping up]

01:18

regulatory restrictions on selling it. A big old factory well can't sell that on [Red cross appears on a factory]

01:23

Amazon or Ebay, definitely not current. Your brand equity

01:27

in your corporation like the relationship you've developed with your

01:30

consumers, yeah it's another non-current asset you can't exactly go to the bank [Guy going up to the bank and pleading]

01:35

and convert brand loyalty to USD. So that's it current assets they live here [Arrow pointing to current assets on a balance sheet]

01:41

on this side of the balance sheet way up top in the good view seats high on the [Current assets in a tree]

01:45

vine of the tree. So put down those currants, stop ranting about the [Stalin holding a currant]

01:49

proletariat and for God's sake just buy some raisins. [Guy pointing to a box of raisins]

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