Capital on a balance sheet represents the owner’s stake in the business. This is usually made up of the company’s initial capital outlay plus any retained earnings, or profits that have been reinvested into the business instead of being paid out to shareholders as dividends. Capital can also refer to the total value of a company’s assets, including cash, buildings, machinery, inventory, and investments. In this sense, it is an important measure of financial health and performance. It is important for businesses to manage their capital effectively so that they can properly allocate funds and build successful operations.