There are two main methods for estimating the fixed capital stock in any nation: direct measurement of the capital stock and perpetual inventory calculations.[4] Attempts have been made to estimate the value of the fixed capital stock for the entire economy using direct business surveys of "book value", business administrative records, tax assessments, and data on gross fixed capital formation, price inflation, and depreciation schedules. A pioneer in this area was the economist Simon Kuznets.[5]​.

The "perpetual inventory method" (PIM) used to estimate fixed capital stocks was invented by Raymond W. Goldsmith in 1951 and subsequently used around the world. Based on an explicit useful life assumption,[4] all data are adjusted for price inflation using a capital expenditure price index. In this way a time series of annual fixed capital stocks is obtained. This data series can also be further modified with various other adjustments for prices, economic depreciation, etc. (nowadays economic historians and statistics use several variants of the PIM approach).

Depreciation as an economic concept distinguishes between "...the value of the stock of capital assets and the annual value of the services of that asset, distinguishing between depreciation and inflation as sources of change in the value of assets, and distinguishing between depreciation in asset values and deterioration in the physical productivity of an asset."[8] Depreciation is the cost of the stock of capital assets allocated over its useful life in proportion to estimates of its useful life, net of maintenance and repair costs.[4]​.

Economic depreciation, therefore, is "...the decline in the price of assets (or shadow price) is due to aging and varies with age"[8]​ Economic depreciation is also characterized by an "...age-price relationship in which the greatest rate of price decline occurs in the early years of the asset's life."[8]​ The amortization allowed for tax purposes may also differ from economic depreciation or "actual" depreciation rates. The key factor is the estimate of the "economic useful life." However, economic depreciation can be estimated with "...sufficient precision to be useful in policy analysis."[8]​.

A business executive who invests&action=edit&redlink=1 "Investment (macroeconomics) (not yet written)") or accumulates fixed capital is tying up wealth in a fixed asset in the hope of future profits. Therefore, such an investment usually involves risk. Write-downs are also sometimes considered partly compensation for this risk. Companies often prefer to lease or rent a fixed asset (such as a vehicle) rather than purchasing it because this reduces the cost of using it and the actual owner can obtain special tax advantages.

An owner can obtain financing for the purchase of fixed capital assets in the capital market, where long-term loans are granted. Financing can also come from reserve funds, the sale of shares and the issuance of debentures "Obligation (finance)"), bonds "Bond (finance)") or other promissory notes.

§ Included in the New Palgrave Dictionary of Economics").[9]​.

There are two main methods for estimating the fixed capital stock in any nation: direct measurement of the capital stock and perpetual inventory calculations.[4] Attempts have been made to estimate the value of the fixed capital stock for the entire economy using direct business surveys of "book value", business administrative records, tax assessments, and data on gross fixed capital formation, price inflation, and depreciation schedules. A pioneer in this area was the economist Simon Kuznets.[5]​.

The "perpetual inventory method" (PIM) used to estimate fixed capital stocks was invented by Raymond W. Goldsmith in 1951 and subsequently used around the world. Based on an explicit useful life assumption,[4] all data are adjusted for price inflation using a capital expenditure price index. In this way a time series of annual fixed capital stocks is obtained. This data series can also be further modified with various other adjustments for prices, economic depreciation, etc. (nowadays economic historians and statistics use several variants of the PIM approach).

Depreciation as an economic concept distinguishes between "...the value of the stock of capital assets and the annual value of the services of that asset, distinguishing between depreciation and inflation as sources of change in the value of assets, and distinguishing between depreciation in asset values and deterioration in the physical productivity of an asset."[8] Depreciation is the cost of the stock of capital assets allocated over its useful life in proportion to estimates of its useful life, net of maintenance and repair costs.[4]​.

Economic depreciation, therefore, is "...the decline in the price of assets (or shadow price) is due to aging and varies with age"[8]​ Economic depreciation is also characterized by an "...age-price relationship in which the greatest rate of price decline occurs in the early years of the asset's life."[8]​ The amortization allowed for tax purposes may also differ from economic depreciation or "actual" depreciation rates. The key factor is the estimate of the "economic useful life." However, economic depreciation can be estimated with "...sufficient precision to be useful in policy analysis."[8]​.

A business executive who invests&action=edit&redlink=1 "Investment (macroeconomics) (not yet written)") or accumulates fixed capital is tying up wealth in a fixed asset in the hope of future profits. Therefore, such an investment usually involves risk. Write-downs are also sometimes considered partly compensation for this risk. Companies often prefer to lease or rent a fixed asset (such as a vehicle) rather than purchasing it because this reduces the cost of using it and the actual owner can obtain special tax advantages.

An owner can obtain financing for the purchase of fixed capital assets in the capital market, where long-term loans are granted. Financing can also come from reserve funds, the sale of shares and the issuance of debentures "Obligation (finance)"), bonds "Bond (finance)") or other promissory notes.

§ Included in the New Palgrave Dictionary of Economics").[9]​.