Question

EXPLAIN THE DIFFERENCE BETWEEN FIXED AND WORKING CAPITAL?
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Answer 1

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⟹ Working capital :

• Working capital is the amount that the company uses in its day to day trading operations. It is a measure of company's efficiency and short term financial health or liquidity. Working capital = current assets - current liabilities.

1. Used for daily business activities.

2. Acquires current assets.

3. If needed, these can be converted into cash immediately.

4. It has liquidity

5. Company needs working capital for operations.

⠀

⟹ Fixed capital :

• Those materials which can be used in production over many years are called FIXED CAPITAL . for example, Tools, machines and buildings range from very simple tools such as a farmer's plough to sophisticated machines such as generators, turbines, computers, etc.

1. Used for long term benefits.

2. Acquires non-current assets.

3. If needed, these can’t be converted into cash immediately.

4. It has no liquidity.

5. Company consumes indirectly.

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Answer 2

Answer:

The primary difference between fixed capital and working capital is that Fixed Capital is the capital which is invested by the company in procuring the fixed assets required for the working of the business whereas working capital is the capital which is required by the company for the purpose of financing its day .

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