4 Differences between Fixed capital and Working capital
Answers
Answered by
720
Fixed Capital Vs Working Capital
Meaning:
Fixed capital alludes to the amount of investment of company in long term assets.
Working capital refers to the capital that is invested into the current assets of the organization.
Term:
Fixed capital is the capital which is invested for long terms that means it remains in business for long time period i.e. For several years
Working capital is the capital which is invested for short term that means it remains in business for short time period i.e. mostly for a year.
Liquidity:
Fixed capital assets have low liquidity since they are costly and require extensive asset disposal methods.
Working capital assets usually have more liquidity since they can promptly be changed over into cash.
Frequent requirement:
Fixed capital is not needed frequently in business. Its requirement is there when a company needs to do any large investment like spreading out of business or acquiring of more fixed assets.
Working capital is needed frequently in business to complete its daily transactions like buying of raw materials, paying wages and so forth.
Source:
The primary source of fixed capital includes debentures, shares and long term loans.
The primary and fundamental source of working capital includes fixed deposits, profits held by company, short term loans, debentures and shares.
Quantity:
The fixed capital is needed more in quantity as compare to working capital.
The working capital is needed less in quantity as compare to fixed capital.
Meaning:
Fixed capital alludes to the amount of investment of company in long term assets.
Working capital refers to the capital that is invested into the current assets of the organization.
Term:
Fixed capital is the capital which is invested for long terms that means it remains in business for long time period i.e. For several years
Working capital is the capital which is invested for short term that means it remains in business for short time period i.e. mostly for a year.
Liquidity:
Fixed capital assets have low liquidity since they are costly and require extensive asset disposal methods.
Working capital assets usually have more liquidity since they can promptly be changed over into cash.
Frequent requirement:
Fixed capital is not needed frequently in business. Its requirement is there when a company needs to do any large investment like spreading out of business or acquiring of more fixed assets.
Working capital is needed frequently in business to complete its daily transactions like buying of raw materials, paying wages and so forth.
Source:
The primary source of fixed capital includes debentures, shares and long term loans.
The primary and fundamental source of working capital includes fixed deposits, profits held by company, short term loans, debentures and shares.
Quantity:
The fixed capital is needed more in quantity as compare to working capital.
The working capital is needed less in quantity as compare to fixed capital.
Answered by
632
"Four differences between Fixed capital and Working capital is given below.
Fixed capital:
- It refers to the capital invested in the long term assets of the company. Money is never invested in this type of capital.
- To establish a company or business, fixed capital is vital.
- The finance for this type of capital is obtained from long-term debt.
- Fixed capital serves strategic objectives.
Working capital:
- It refers to the "capital invested" in the current assets of the company. Money is the major investment of this "type of capital".
- To run and maintain a company or business, "working capital" is vital.
- The finance for this type of capital is obtained from short-term debt.
- Working capital serves operational objectives."
Similar questions