Distinguish between Fixed Capital and Working Capital.

Question

Accepted Answer

| Basis | Fixed Capital | Working Capital |
|---|---|---|
| Meaning | Capital invested in fixed assets used over a long period | Capital invested in current assets to meet day-to-day operating needs |
| Purpose | To establish and equip the business (land, buildings, machinery) | To run the business's daily operations (raw material, wages, stock, debtors) |
| Period of investment | Long-term — invested once and kept blocked for a long duration | Short-term — raised and recovered repeatedly in a continuously recurring cycle |
| Liquidity | Not easily convertible into cash without disrupting the business | Readily convertible into cash in the normal course of business |
| When raised | Mainly at the time of formation or major expansion | Continuously, throughout the life of the business | …

Q.Distinguish between Fixed Capital and Working Capital.

Concept understanding — Working Capital — Meaning and Factors

Basis	Fixed Capital	Working Capital
Meaning	Capital invested in fixed assets used over a long period	Capital invested in current assets to meet day-to-day operating needs
Purpose	To establish and equip the business (land, buildings, machinery)	To run the business's daily operations (raw material, wages, stock, debtors)
Period of investment	Long-term — invested once and kept blocked for a long duration	Short-term — raised and recovered repeatedly in a continuously recurring cycle
Liquidity	Not easily convertible into cash without disrupting the business	Readily convertible into cash in the normal course of business
When raised	Mainly at the time of formation or major expansion	Continuously, throughout the life of the business

Q.Distinguish between Fixed Capital and Working Capital.

🎓Unlock everything free for 14 days

Unlock everything free for 14 days