What is the difference between fixed capital and working capital?
solid capital and working capital are two very important assets in the ongoing function of almost all types of business. Each type of capital provides different benefits and allows you to continue the production of goods and services, which in turn are offered for sale to customers. While both are used to achieve a common goal, the nature of each group of assets is somewhat different.
One of the main differences between the two concepts is related to their relevant roles. Fixed capital assets are those that are considered long -term or durable and can be used repeatedly for a long time. Examples include physical equipment owned and operated by the company, equipment used in the production process, and other shares that are used daily to allow the company to operate. Fixed capital can be used for years before they need to be replaced.
On the other hand, working capital concerns the assets that are obtained and then used in business operationsfor a shorter time. This may include cash that flows into business from various sources and is used to buy raw materials, debt management and honors the obligations that the company performs as part of its overall operation. In view of this, the difference between the two types of capital is clearer, one related to the assets that provide an advantage for a long time (that is "fixed" to "solid"), and the other that is to do with assets that are constantly accepted and consumed just as quickly as they "work".
Most companies require that solid capital and working capital work. Although business rents its physical location (unlike its ownership), there is a great chance that the company will still own some equipment that is Essential for the continuing function of the operation. At the same time a permanent flow of cash from the sale of goods and services, trading loans and trading lines allows you to cover everyday expenditure and support GeneRenovation of income. Maintaining the ongoing inventory of both types of capital and their proper management will lead a long way to ensure that the enterprise is able to grow and prosper for many years.