Question

what is meant by working capital ? How is it different from fixed capital​

Answer 1

Explanation:

Fixed CapitalWorking CapitalMeaning:

Fixed capital refers to any kind of physical

capital. i.e.fixed assets.Working capital refers to current assets minus current liabilites.Nature:

It stays in business almost permanently i.e. for more than one

accounting year.Working capital is circulating capital.Purpose:

It is not used up in production of product but invested in fixed assets such as land,

building, equipment's, etcWorking capital is invested in short term assets such as cash, account receivable,inventory,etc.Source:

Fixed capital fund can come from selling shares,debentures,long term loans, bonds,etcWorking capital can be funded with short term loans, deposits, trade credits,etcObjective of investment:

Investor invests money in fixed capital hoping to make future profit.Investor invests money in working capital for getting immediate return.Risk Involved:

Investment in fixed capital implies a riskInvestment in working capital is less risky

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Answer 2

Fixed Capital includes tools and machines that can be used for many years in cultivation.

While raw materials and money in hand are called working capital. Unlike, fixed capital, working capital is used up in the cultivation.

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