Capital Formation

Capital formation is the value of capital a company added during an accounting period. This includes tools and equipment, even electricity.

The concept can apply to countries as well as companies. Countries ideally should always be producing capital to replace what is has used up. Generally, to produce more assets, a country has to either draw it from policy (taxes) or draw it from savings and investments of citizens. The World Bank measures a country's poverty by measuring the assets the country has or is producing, and the overall amount the country has in savings, along with the country Gross Domestic Product (GDP) and its overall debt.

Basically, it's measuring the assets and debts of a country and its citizens, and looking at how fast the country is adding assets.