Question

Write a short note on:

Types of capital.

Answer 1

Capital can be classified as:
(1) On the Basis of Durability:
(a) Fixed capital refers to durable capital assets which can be used again and again in production process. Examples are machinery, tools and equipments, plant size, factory building, etc.
(b) Working or Variable capital refers to non-durable capital assets which can be used only once in production. Examples are raw materials, electricity, etc.
(2) On the Basis of Mobility:
(a) Sunk Capital: Sunk capital is specialised capital. It is only for specific use. Example, xerox machine, road rollers, blast furnace, etc.
(b) Floating capital is non-specialised capital, which has alternative uses. Examples: computers, electricity, coal.

(3) On the Basis of Nature:
(a) Real capital refers to machinery, tools and equipments, factory building, etc., which is directly used in production.
(b) Money capital refers to money invested in business or fund raised by issuing shares and debentures. Real capital is purchased with money capital.
(4) On the Basis of Ownership:
(a) Private Capital: The capital that is owned by private individuals or institutions are called as private capital. E.g., capital owned by Tata's, Birla's, etc.
(b) Public Capital: The capital that is owned by governing bodies like Local Government, State Government or Central Government is called as public capital. E.g. The BEST buses, Railways etc.
(c) National Capital: National capital refers to private plus public capital.