Question
Distinguish between: Fixed Capital and Working Capital.
| No. | Points of Difference | Fixed Capital | Working Capital |
| $1.$ | Meaning | Capital invested in assists of business such as land, building, machinery, furniture etc is called fixed capital. | Capital employee in current assists such as raw material, stock of finished goods, debtors, bills receivable etc is called working capital. |
| $2.$ | Time duration | This capital is invested in business for 5 and or more years. | This capital is invested in business for short term. |
| $3.$ | Liquidity | This capital is blocked for long term so the ratio of liquidity is normal. | This capital is employee in current assists so it is quickly converted into cash so the level of cash liquidity is high. |
| $4.$ | Risk | This capital is employee in fixed assists so the risk of obsolete is high. | The ratio of risk is low. |
| $5.$ | Requirement | It is requires to purchase fixed assists in business such as land, labour, salary etc. | Working capital is required to purchase raw material and for day-to-day expense of building, plant, machinery etc. |
| $6.$ | Depreciation | This capital is employee in fixed assists so depreciation is calculated on it. | This capital is employee in current assists so depreciation is not calculated on it. |
| $7.$ | Sources | This capital is obtained through of shares, debenture of financial institutions. | The source of this capital are trade credit bank over draft, indigenous bankers, public deposits etc. |
| $8.$ | Other names | Fixed capital is known as long term capital or steady capital. | Working capital is known as short term capital, unsteady capital, moving capital, changeable capital, current capital, flexible capital etc. |
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