Capital management

Capital management is like managing your money. You have a certain amount of money, and you want to make sure you use it wisely. Just like you have to decide how to spend your allowance or birthday money, companies and banks also have to decide how to use their money.

Capital is the money that a company or bank has. They can use this money for different things. One way is to invest it. This means they give the money to someone or some other company, and they hope to get more money back in return. It's like when you give your friend some money to buy toys for you, and then your friend gives you back even more toys.

Another way to use capital is to buy things for the company or bank. For example, a company might need to buy new machines to make products. They can use their capital to buy these machines. It's like when you use your allowance to buy Legos or a new bike.

But companies and banks have to be careful with their capital. They want to make sure they are using it in the best way possible. They might have to decide between investing the money or buying new things. They have to think about what will give them the most benefit and make the most money for them in the long run.

Sometimes, companies or banks also need to borrow money from other people or banks. This is called getting a loan. They can use the borrowed money for things they need, and they promise to pay it back later. It's like when you borrow toys from your friend and promise to give them back later.

Capital management is all about making smart decisions with money. Just like you have to think about what toys or things you want to buy, companies and banks have to think about where they should use their money to make the most money in the future.