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Answer» Fixed Capital and Working Capital. | Sr. No. | Fixed capital | working capital | | Meaning | | 1 | Fixed capital is the protion of total capital which is invested in fixed assets such as land, building equipments, machinery etc. | Working cpatial refers to a firm's investment in short term assets such as cash, short term securities, account receivable and inventories.
| | Nature | | 2. | It may be held in business for 5,10,20 years or more | It remains in the business for a short period of time and circulates into the business. | | Purpose | | 3. | Fixed capital is invested in long term assets for the growth and expansion of a firm | It is invested in short term assets to fulfill working capital needs. | | Sources | | 4. | It is generated by issuing shares, debentures, borrowing of loans etc. | It is accumulated through trade credits, short term loans, public deposits etc. | | Objective | | 5. | Investors invest their money in fixed capital for better future returns. | investors invest in working capital for immediate returns. | | Risks involved | | 6. | Risk involved in the investment of fixed capital is high | Risk involved in the investment of working capital is low as compared to fixed capital. | | Authority | | 7. | Generally, Top level management decides on matters related to fixed capital investment. | Middle level or lower level managers can decide on matters related to working capital needs. | | Factors Affecting | | 8. | Need of fixed capital depends upon various factors such as: related to fixed capital investment | Need of working capital depends upon various factors such as: seasonal fluctuation, production cycle, requirement of cash etc. |
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