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Kerala PSC Indian Economy Book Study Materials Page 575Book's First Page
onomi on epts and erminolo ies 22.9 (M), earnings (E), liquidity (L) and systems for paid-up capital (paid-up capital is control (S). The acronym is used as a technique subscribed capital plus credit/due on the for evaluating and rating the operations and shareholders). performance of banks all over the world. (iv) Issued Capital: The amount of the capital which has been sought by a company to cApitAl be raised by the issue of shares (it should Capital is one of the three main factors of be kept in mind that this cannot exceed production (labour and natural resources are the the authorised capital). other two), classified into physical capital (i.e., (v) Called-up Capital: The amount of share factories, machines, office, etc.) and human capital capital the shareholders have been called (i.e., training, skill, etc.). to pay to date under the phased payment In a joint stock company, the capital has terms. It is usually equal to the ‘paid-up various specific terms showing different forms of capital’ of the company except where the share capital: some shareholders have failed to pay (i) Authorised Capital: This is the amount of their due installments (known as calls in share capital fixed in the Memorandum arrears). of Association (MoA) and the article of association of a company as required by cApitAl ADequAcy rAtio the Companies Act. This is also known as A regulation on commercial banks, co-operative the Nominal or Registered Capital. banks and the non-banking financial companies This is the limit (i.e., nominal value) to maintain a certain amount of capital in relation upto which a company can issue shares. to their assets (i.e., loans and investments) as a Companies often extend their authorised cushion (shock-absorber) against probable losses capital (via an amendment in the MoA) in their investments and loans. in advance of actual issue of new shares. This allows the timing of capital issue to A concept devised by the Bank for be fixed in light of the company’s need International Settlements (BIS), Basel, the for new capital and the state of the capital provision was implemented in India in 1992 by market and allows share options to be the RBI (for more detailed discussion see the excercised accordingly. chapter on ‘Banking’). (ii) Paid-up Capital: The part of the authorised capital of a company that has cApitAl consumption actually been paid up by the shareholders. The capital that is consumed by an economy or A difference may arise because all shares a firm in the production process. Also known as authorised may not have been issued or depreciation. the issued shares have been only partly paid-up by then. cApitAl-output rAtio (iii) Subscribed Capital: The capital that has actually been paid by the shareholders A measure of how much additional capital is (as they might have committed more needed to produce each extra unit of the output. than this to contribute). It means, the Put the other way round, it is the amount of extra subscribed capital is the actually realised output produced by each unit of added capital.