Question

Differentiate between:
(a) Fixed and Circulating Capital
(b) Sunk and Floating Capital

Answer 1

(i) Fixed and Circulating Capital: Fixed capitals are continuously used in the process of production, for instance, machines, tools, equipments etc. On the other hand, the capital which is used for single time is called circulating capital. For example coal, petrol and raw material etc.

(ii) Sunk and Floating Capital: The capital which remains fixed and cannot be shifted from one place to another is called sunk capital. Factory, machines etc. are sunk capital. However, floating capital is that which can be used for several purposes or by several industries. For example, money and other raw materials are the example of floating capital.