Which of the following best describes physical capital?

Physical capital refers to the tangible assets that a business uses in the production process to create goods and services. This includes manufactured resources like equipment, machinery, tools, and buildings, which are essential for enabling production activities. Investing in physical capital typically improves efficiency and productivity, as these resources are critical in turning raw materials into finished products.

While financial assets are important for funding such investments, they do not constitute physical capital themselves. Similarly, the sum of skills possessed by workers relates to human capital, which emphasizes the abilities and knowledge of labor rather than the physical assets involved in production. Natural resources pertain to land and raw materials that are utilized in production but are distinct from manufactured goods like machinery. Thus, the definition of physical capital aligns clearly with manufactured productive resources, confirming why this choice is the correct characterization.