Fixed Capital Working Capital

Fixed Capital
Working Capital
1.      Meaning: -
Fixed capital refers to that portion of total capital which is invested in fixed assets such as land, building, equipment, etc.
2.      Nature: -
Fixed Capital remains in the business for a long period of time i.e., for more than one year.
3.      Purpose: -
Amount of fixed capital is employed into the fixed assets such as land, building, machinery, equipments, etc. it is not used to produce goods and services.
4.      Sources:-
Fixed capital is funded through different sources such as issue shares, debentures, bonds and borrowing long term loans form financial institutions.
5.      Objectives: -
Investors invest the funds in fixed capital to earn future profits.
6.      Risks involved: -
An investment made in fixed capital is risky.

1.      Working Capital refers to the firm’s investments in short term assets viz. cash, short term securities, account receivable and inventories, etc.

2.      Working capital remains in the business for a short period of time and circulates into the business.

3.      Amount of working capital is employed into the short term assets such as inventories, cash, account receivables, etc. it is used to produce goods and services.

4.      Working capital funded from different sources such as borrowing short term loans, accepting public deposits, trade credit, etc.

5.      Investors invest their funds in working capital to get immediate returns.

6.      An investment made in working capital is comparatively less risky.