{"id":4488,"date":"2021-08-11T20:01:46","date_gmt":"2021-08-11T14:31:46","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=4488"},"modified":"2025-10-07T19:07:38","modified_gmt":"2025-10-07T13:37:38","slug":"difference-between-fixed-capital-and-working-capital","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/","title":{"rendered":"Difference Between Fixed Capital and Working Capital (6 Points)"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ee0aae58ba1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ee0aae58ba1\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Difference_Between_Fixed_Capital_and_Working_Capital\" >Difference Between Fixed Capital and Working Capital<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Fixed_Capital\" >Fixed Capital<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Meaning_of_Fixed_Capital\" >Meaning of Fixed Capital:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Working_Capital\" >Working Capital<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Meaning_of_Working_Capital\" >Meaning of Working Capital:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/#Difference_Between_Owned_Capital_and_Borrowed_Capital\" >Difference Between Owned Capital and Borrowed Capital<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Difference_Between_Fixed_Capital_and_Working_Capital\"><\/span>Difference Between Fixed Capital and Working Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading has-text-align-left\"><span class=\"ez-toc-section\" id=\"Fixed_Capital\"><\/span>Fixed Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Fixed_Capital\"><\/span>Meaning of Fixed Capital:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Fixed <a href=\"https:\/\/www.investopedia.com\/terms\/c\/capital.asp\" data-type=\"link\" data-id=\"https:\/\/www.investopedia.com\/terms\/c\/capital.asp\" target=\"_blank\" rel=\"noopener\">capital<\/a> is the capital that is used for buying fixed assets that are used for a longer period of time in the business. These assets are not meant for resale.<\/p>\n\n\n\n<p>In simple words, fixed capital refers to capital invested for acquiring fixed assets. It stays in the business for a long period almost permanently.<\/p>\n\n\n\n<p>Examples of fixed capital are &#8211; capital used for purchasing land and building, furniture, plant, and machinery, etc. Such capital is required usually at the time of the establishment of a new company. However, existing companies may also need such capital for their expansion and development, replacement of equipment, etc.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"512\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-Between-Fixed-Capital-and-Working-Capital-1024x512.png\" alt=\"\" class=\"wp-image-4497 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-Between-Fixed-Capital-and-Working-Capital-1024x512.png 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-Between-Fixed-Capital-and-Working-Capital-300x150.png 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-Between-Fixed-Capital-and-Working-Capital-768x384.png 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-Between-Fixed-Capital-and-Working-Capital.png 1200w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/512;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading has-text-align-center has-light-green-cyan-background-color has-background\"><span class=\"ez-toc-section\" id=\"Working_Capital\"><\/span>Working Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Working_Capital\"><\/span>Meaning of Working Capital:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Working capital is the capital that is used to carry out day-to-day business activities. After estimating the fixed capital requirement of the business firm, it is necessary to estimate the amount of capital, that would be needed to ensure the smooth functioning of the business firm. A business firm requires funds to store adequate raw material in stock. A firm would need capital to maintain sufficient stock of finished goods.<\/p>\n\n\n\n<p>A business firm will have to arrange capital for the following :<br>a) For building up inventories<br>b) For financing receivables<br>c) For covering day-to-day operating expenses.<\/p>\n\n\n\n<p>The capital invested in these assets is referred to as \u2018Working capital\u2019. The concept of working capital is viewed differently by leading authorities. Some authorities consider working capital as equivalent to an excess of current assets over current liabilities. Gerstenbergh, defines it as, \u2018\u2018The excess of current assets over current liabilities.\u2019\u2019 This approach refers to \u2018Net Working Capital\u2019. Gerstenbergh does not call it working capital. He prefers to call it \u2018circulating capital\u2019.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Fixed Capital and Working Capital<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-owned-capital-and-borrowed-capital\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-owned-capital-and-borrowed-capital\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Owned Capital and Borrowed Capital<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-debenture-and-share\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Debenture and Share<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Preference Shares and Equity Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Difference_Between_Owned_Capital_and_Borrowed_Capital\"><\/span>Difference Between Owned Capital and Borrowed Capital<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Points<\/strong><\/td><td><strong>Fixed Capital<\/strong><\/td><td><strong>Working Capital<\/strong><\/td><\/tr><tr><td>1) Meaning<\/td><td>Fixed capital refers to any kind of physical asset i.e. fixed assets.<\/td><td>Working capital refers to the sum of current assets.<\/td><\/tr><tr><td>2) Nature<\/td><td>It stays in the business almost permanently.<\/td><td>Working capital is circulating capital. It keeps changing.<\/td><\/tr><tr><td>3) Purpose<\/td><td>It is invested in fixed assets such as land, building, equipments, etc.<\/td><td>Working capital is invested in short term assets such as cash, account receivable, inventory, etc.<\/td><\/tr><tr><td>4) Sources<\/td><td>Fixed capital funding can come<br>from selling shares, debentures,<br>bonds, long term loans, etc.<\/td><td>Working capital can be funded<br>with short term loans, deposits,<br>trade credit, etc.<\/td><\/tr><tr><td>5) Objectives of Investors<\/td><td>Investors invest money in fixed<br>capital hoping to make future<br>profit.<\/td><td>Investors invest money in working<br>capital for getting immediate<br>returns.<\/td><\/tr><tr><td>6) Risk<\/td><td>Investment in fixed capital implies<br>more risk.<\/td><td>Investment in working capital is<br>less risky.<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":4497,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[5308],"class_list":["post-4488","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-misc","tag-difference-between-fixed-capital-and-working-capital"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4488","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=4488"}],"version-history":[{"count":2,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4488\/revisions"}],"predecessor-version":[{"id":39259,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4488\/revisions\/39259"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/4497"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=4488"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=4488"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=4488"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}