Quick Summary
Fixed Capital represents investments in assets that provide benefits over multiple years.
Fixed Capital refers to the portion of a company's capital that is invested in fixed assets or long-term assets. These are assets that are not meant for resale but are used to generate income over an extended period.
Components of Fixed Capital
- Land and buildings
- Plant and machinery
- Furniture and fixtures
- Vehicles
- Computers and technology infrastructure
- Intangible assets (patents, goodwill)
Characteristics
- Used for long-term business operations
- Not easily convertible to cash
- Shown on Balance Sheet as Fixed Assets
- Depreciated over useful life (except land)
- Provides foundation for revenue generation
Sources of Fixed Capital
- Owner's equity/share capital
- Long-term loans and debentures
- Retained earnings
- Term loans from banks
- Venture capital/private equity
Fixed Capital vs Working Capital
| Fixed Capital | Working Capital |
|---|---|
| Long-term assets | Short-term assets |
| Not for resale | Converts to cash quickly |
| Permanent in nature | Fluctuates with business cycle |
Key Points
- Investment in long-term assets
- Shown as Fixed Assets on Balance Sheet
- Not for resale
- Depreciated over useful life
- Permanent capital of business