Final answer:
A sole trader is a business organization where one person operates the business and is personally liable for all debts and obligations. The capital shows the amount of money the sole trader has invested in the business.
Step-by-step explanation:
A sole trader is a type of business organization in which one person operates the business and is personally liable for all the debts and obligations of the business. The term 'capital' in this context refers to the initial investment or funds that the sole trader contributes to start and run the business.
For example, if a person wants to open a small grocery store as a sole trader, they may need to invest their own money into purchasing inventory, renting a store space, and buying equipment and fixtures. The capital shows the amount of money the sole trader has invested in the business and is an indication of their financial commitment to the venture.