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Capital stock


The total amount of physical capital existing at any one time in a firm, industry or economy. It is extremely difficult to obtain a satisfactory measure of this in practice. Clearly it is impossible to add up the physical amounts of different types of capital, but this then raises the problem of defining a useful money measure. Strictly, the value of the current capita! stock is the present value of the stream of income which it will generate in future, but it is of course impossible to measure this with any real precision. Hence, we are often thrown back on the valuations of assets shown in firms' balance sheets which need bear little relationship to any economically meaningful value, or valuation made for insurance purposes.

Reference: The Penguin Dictionary of Economics, 3rd edt.