What is Fixed Capital?
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.
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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.
| Fixed Capital | Working Capital |
| Definition | |
| Investing capital in the long term assets of an enterprise. | Working capital is the capital invested in the current assets of an enterprise. |
| Types of assets acquired | |
| Used to acquire non-current assets for the company | Used to acquire current assets for the company |
| Liquidity | |
| Fixed capital is not at all liquid | Working capital is highly liquid |
| Conversion to cash | |
| Not possible to convert into cash | Can be converted into cash |
| Objective served | |
| Serves strategy oriented objectives | Serves operational objectives |
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The above mentioned is the concept, that is elucidated in detail about ‘Difference between the Fixed Capital and Working Capital’ for the Commerce students. To know more, stay tuned to BYJU’S.
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