Write 4 differences between Fixed capital and Working capital
Write 4 differences between Fixed capital and Working capital
Answer:
Fixed Capital (FC) indicates the investment of the fund generated in the company’s long-term belongings. During its primary stage, it is a mandatory requirement of an organization. It is the part of the whole fund, that is not used for production but is held for more than 1 accounting period in trade. Its character is perpetual and remains within the company’s intangible and tangible properties.
Working capital(WC) is the indicator that calculates the company’s economic soundness and functional performance. It is the product of current assets minus current liabilities because current assets are assets that can be converted into cash within 1 year, notably cash, investors, inventories, and so on., while current liabilities are those which decrease outstanding payments in 1 year, notably short term loans, bank overdraft, creditors, tax provisions and so on.
The difference between the Fc and WC are tabulated below.
Fixed Capital (FC)
Working capital(WC)
Fixed capital is not liquid at all.
Working capital is highly liquid
FC is used to acquire non-current assets for the company
WC used to acquire current assets for the company
FC is not possible to turn into cash
WC can be turned into cash
FC achieves strategy-oriented targets.
WC achieves organizational targets.
Answer:
Fixed Capital (FC) indicates the investment of the fund generated in the company’s long-term belongings. During its primary stage, it is a mandatory requirement of an organization. It is the part of the whole fund, that is not used for production but is held for more than 1 accounting period in trade. Its character is perpetual and remains within the company’s intangible and tangible properties.
Working capital(WC) is the indicator that calculates the company’s economic soundness and functional performance. It is the product of current assets minus current liabilities because current assets are assets that can be converted into cash within 1 year, notably cash, investors, inventories, and so on., while current liabilities are those which decrease outstanding payments in 1 year, notably short term loans, bank overdraft, creditors, tax provisions and so on.
The difference between the Fc and WC are tabulated below.
|
Fixed Capital (FC) |
Working capital(WC) |
|
Fixed capital is not liquid at all. |
Working capital is highly liquid |
|
FC is used to acquire non-current assets for the company |
WC used to acquire current assets for the company |
|
FC is not possible to turn into cash |
WC can be turned into cash |
|
FC achieves strategy-oriented targets. |
WC achieves organizational targets. |
