OMTEX CLASSES: Fixed Capital Working Capital

Fixed Capital Working Capital



s.r
 Fixed Capital
Working Capital
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Meaning
Fixed capital refers to any kind of physical capital. i.e. fixed assets.

Nature
It stays in business almost permanently i.e. for more than one accounting year.

Purpose
It is not used up in production of product but invested in fixed assets such as land, building, equipments, etc.

Sources
Fixed capital fund can come from selling shares, debentures, long term loans, bonds, etc.

Objective of investment
Investor invests money in fixed capital hoping to make future profit.

Risk Involved
Investment in fixed capital implies a risk.

Working capital refers to current assets minus current liabilities.


Working capital is circulating capital.



Working capital is invested in short term assets such as cash, account receivable, inventory, etc.



Working capital can be funded with short term loans, deposits, trade credit, etc.


Investor invests money in working capital for getting immediate return.


Investment in working capital is less risky.