Question

Explain the meaning of fixed capital and working capital in terms of production? ​

Answer 1

Answer:

Fixed capital and Working Capital Differences

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 to day operations.

Capital is a critical ingredient in any business. Without capital, no business can be run, and no business can exist. Capital can be categorized in two forms – fixed capital and working capital.

Fixed capital is used to acquire non-current assets that would serve the business for more than one accounting period

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On the other hand, working capital is used to serve the business on a day-to-day basis fulfilling the requirement of everyday production and operation.