Q4. Differentiate between: (give 3 points) Fixed Capital / Working Capital Skilled labour / Unskilled labour
Answers
Explanation:
Physical capital: Physical capital is the variety of inputs required at every stage during production. It includes fixed capital and working capital.
Fixed capital: Tools and machines range from a plough to a tractor and sophisticated machines like generators, turbines, computers, etc. The tools, machines, buildings which can be used in production over many years are called fixed capital.
Working capital: Production requires a variety of raw materials. It requires money to make payments and buy other necessary items. Raw materials and money in hand are called working capital. Unlike tools and machines, these are used up in production.
For example, Yarn required by a weaver; clay used by a potter.
Human capital: One needs knowledge and enterprise to be able to put together land, labour and physical capital and produce an output; either to use it by oneself or to sell in the market. This is known as human capital, which enables better production with human skill and knowledge
Answer:
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Explanation:
What is Fixed Capital?
FC implies the fund investment created in the long term belongings (assets) of the firm. It is a mandatory necessity of an enterprise during its primary stage, i.e. to begin the business concern or to administer the existing trade. It is that portion of the entire fund, which isn’t utilised for manufacturing but they are kept in trade for more than 1 accounting cycle. Its character is perpetual which subsist in the framework of intangible and tangible assets of the firm.
What is Working Capital?
WC is the gauge that measures the economic soundness and functional effectiveness of the firm. However, it is the result of current assets minus current liabilities, whereas current assets are the assets which can be transformed into cash within 1 year, namely cash, debtors, inventories, etc., whilst current liabilities are those liabilities that decrease outstanding for pay in 1 year, namely, bank overdraft, short term loans, tax provision, creditors, etc.,
This article is a ready reckoner for all the students to learn the difference between Fixed Capital and working capital.