Q.What is meant by Fixed Capital?

Fixed capital is one of the two broad types of financial needs every AP Intermediate Commerce student must be able to identify.

These assets are used repeatedly over a number of years to carry on production or provide services, rather than being bought for resale.

Fixed capital refers to the funds a business invests in its fixed or long-term assets. These assets include land and buildings, plant and machinery, furniture and fixtures, vehicles, and equipment such as tools or computers, all of which are held by the firm for a long period and used repeatedly to produce goods or render services, rather than being purchased with the intention of resale in the ordinary course of business.

The amount of fixed capital a firm needs depends on factors such as the nature and scale of the business, the technology and method of production used, and the firm's future expansion plans. Since these assets stay in the business for years and lose value only gradually through depreciation, fixed capital is normally raised from long-term sources of finance, such as owners' funds or long-term borrowings, and not from short-term credit.