Question

Distinguish between fixed capital and variable capital.

Answer 1

*Fixed Capital refers to the capital which is invested in procuring fixed assets for business.

*While Variable Capital represents the amount of money utilized for financing in day to day business operations.

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Answer 2

The main differences between the fixed capital and variable capital are:

1) The use of fixed capital in business is for short term whereas the variable capital is used in business for long term use.

2) Fixed capital is used to accomplish the day to day work of the business whereas the use of variable capital is for buying the non-current assets for the business.

3) The use of fixed capital is for permanent use whereas the use of variable capital is not temporary but according to the needs.