Meaning & use
capital reserve
Last updated
Meaning
nouncountable or uncountablebusinessfinance
Money that a company keeps as a reserve, usually from profits or share sales, and does not pay out as dividends.
Grammar: Can be used with an or the, or without an article; plural capital reserves.
Patterns
- build up a capital reserve
- use capital reserves for something
- a capital reserve of money
The company built up a capital reserve to fund future expansion.
Capital reserves cannot be used to pay dividends to shareholders.
They dipped into their capital reserves to cover the unexpected loss.
Word forms
| plural | capital reserves |
|---|
Common combinations
- build up capital reserves
- The firm built up capital reserves over several profitable years.
- draw on capital reserves
- The bank had to draw on its capital reserves during the crisis.
- capital reserve account
- The funds were transferred to a capital reserve account.
- maintain capital reserves
- Regulations require banks to maintain adequate capital reserves.
Synonyms and how they differ
- reserve fund
- Reserve fund is a broader term for any money set aside; capital reserve is a specific accounting category that cannot be distributed as dividends.
- retained earnings
- Retained earnings are profits kept in the business; capital reserve often comes from non-operating sources like share premiums.
Word family
Commonly confused: capital reserve or cash reserve?
capital reserve vs cash reserve
Cash reserve is money kept readily available for daily operations; capital reserve is a more formal, restricted fund.
Practice
Which sentence uses 'capital reserve' correctly?
Choose one answer.
Capital reserve is money set aside for future investment or to strengthen the company, not for dividends or daily expenses. Option An is wrong because capital reserves cannot be used for dividends; C and D confuse it with cash or operating funds.
Make it your own
Write a sentence using “capital reserve”, then check it and compare it with the examples above.