differentiate between fixed capital and working capital
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FIXED CAPITAL
Fixed capital refers to the funds invested in fixed or permanent assets as land, building, and machinery etc by the organization.Fixed capital is required for establishment of business. Fixed capital invested in the long term assets is very important since it determines the value of firm through the growth, profitability, and risk. Fixed capital also refers to investment in intangible assets like copyrights, patents, goodwill, organization.
WORKING CAPITAL
working capital refers to the funds which are invested in materials, work in progress, finished goods, receivables, and cash etc. Working capital is required to utilize fixed assets of the company. Working capital plays a key role in a business enterprise. The efficiency of the business enterprise largely depends on its ability to manage its working capital. Working Capital is concerned with the management of firm’s current assets and current liabilities.
Fixed capital refers to the funds invested in fixed or permanent assets as land, building, and machinery etc by the organization.Fixed capital is required for establishment of business. Fixed capital invested in the long term assets is very important since it determines the value of firm through the growth, profitability, and risk. Fixed capital also refers to investment in intangible assets like copyrights, patents, goodwill, organization.
WORKING CAPITAL
working capital refers to the funds which are invested in materials, work in progress, finished goods, receivables, and cash etc. Working capital is required to utilize fixed assets of the company. Working capital plays a key role in a business enterprise. The efficiency of the business enterprise largely depends on its ability to manage its working capital. Working Capital is concerned with the management of firm’s current assets and current liabilities.
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Differences are follows
Fixed capital supports the business indirectly. Working capital supports the business directly.
Fixed capital is invested in long-term assets. Working capital is invested in current assets.
Fixed capital is required before the business starts. Working capital is required after the business gets started.
Fixed capital can’t be liquidated into cash immediately. Working capital can be liquidated into cash immediately.
Fixed capital serves the business for a very long period of time. Working capital serves the business for a very short period of time.
The orientation of fixed capital is strategic. The orientation of working capital is operational.
Fixed capital supports the business indirectly. Working capital supports the business directly.
Fixed capital is invested in long-term assets. Working capital is invested in current assets.
Fixed capital is required before the business starts. Working capital is required after the business gets started.
Fixed capital can’t be liquidated into cash immediately. Working capital can be liquidated into cash immediately.
Fixed capital serves the business for a very long period of time. Working capital serves the business for a very short period of time.
The orientation of fixed capital is strategic. The orientation of working capital is operational.
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