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Fixed
Capital
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Working
Capital
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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.
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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.
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Fixed Capital Working Capital
