Final answer:
The capital requirement refers to the amount of funding a firm needs to operate. Firms can raise this capital through investments, profits, borrowing, or selling stock. It does not represent total profits or dictate the number of employees in a company.
Step-by-step explanation:
The capital requirement refers to the amount of funding a firm needs to operate. It is the financial capital that a business needs to pay for projects such as buying machinery, building plants, or starting research and development projects. Firms can raise this capital by getting investments from early-stage investors, reinvesting profits, borrowing through banks or bonds, or selling stock.
For example, a firm may need to raise capital to buy a machine that will last for 10 years. They can choose to raise this capital by getting investors or taking out a loan from a bank.
The capital requirement does not represent the total profits of a business or dictate the number of employees in a company. It also does not measure the market share of a business.