Fixed Capital vs Working Capital - Top Differences

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.

Also Read: Maintenance of Capital Accounts of Partners

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.

Basis Fixed Capital Working Capital
Meaning Investing capital in the long term assets of an enterprise. Working capital is the capital invested in the current assets of an enterprise.
Comprise of Durable commodities Short term liabilities and assets
Liquidity No Yes
Uses Utilised to purchase non-current assets of the trading concern. Utilised for short term investment.
Serves Strategic objectives. Operational objectives.

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.

Must Read Articles for Commerce Students: 2019

Leave a Comment

Your email address will not be published. Required fields are marked *