What Are Features Of Fixed Capital?

What are Features of Fixed Capital?

The 10 of import features of fixed capital are depicted inward the next image.

The primary characteristics or features of fixed working capital missive of the alphabet are listed equally follows:

1. Purchase of fixed assets.
2. Promotion together with expansion of business.
3. Low liquidity.
4. Permanent inward nature.
5. Primary sources.
6. Amount of fixed capital.
7. Long-term needs of business.
8. Source of wealth together with risk.
9. Source of profit.
10. Appreciation together with depreciation.
11. Miscellaneous features.

Now let's verbalize over each characteristic of fixed working capital missive of the alphabet 1 yesteryear one.

1. Purchase of fixed assets

Fixed working capital missive of the alphabet is capital invested inward fixed assets. In other words, it is working capital missive of the alphabet used for purchasing fixed assets.

The fixed assets tin live grouped nether 2 primary categories, viz.,

1. Tangible fixed assets includes land, building, plant, machinery, etc.
2. Intangible fixed assets includes patents, copyrights, goodwill, together with thus on.

2. Promotion together with expansion of business

Fixed working capital missive of the alphabet is required for promoting concern together with its ancillary (supplementary) activities.

Along amongst promotion, fixed working capital missive of the alphabet besides helps inward the expansion, modernization together with diversification of business.

3. Low liquidity

In general, the Definition of liquidity tin live stated equally follows:

“Anything which is easily saleable inward the market together with gets an expected value (price) is said to live liquidable. That is, it has a liquidity.”

Low liquidity way something, which is non easily realizable (i.e. saleable).

Fixed working capital missive of the alphabet is used to larn (purchase) fixed assets. These assets receive got a depression liquidity because they are non easily saleable.

4. Permanent inward nature

Fixed working capital missive of the alphabet has a long-lasting existence. It is permanent inward nature. It cannot live withdrawn from the business. However, it tin live withdrawn alone when the concern closes or shuts downward (i.e. liquidates).

5. Primary sources

Primary sources of fixed working capital missive of the alphabet are shares, debentures together with long-term loans.

In the accumulated i.e. full fixed capital,

1. The owners funds come upwards from shares.
2. The fixed borrowed funds come upwards from debentures.
3. The long-term loans are obtained from fiscal Institutions.

Of the higher upwards 3 sources, shares are the primary origin of fixed capital.

6. Amount of fixed capital

The sum of fixed working capital missive of the alphabet depends on the next factors:

1. Nature of business.
2. Size of companionship or organization.
3. Location of business.
4. Business-related infrastructure facilities.
5. Methods of production.

7. Long-term needs

Fixed working capital missive of the alphabet is used to encounter the long-term needs of the concern to a greater extent than or less of which are listed below.

1. Amalgamation.
2. Merger.
3. Foreign collaboration.
4. Sharing or leasing of technologies.

8. Source of wealth together with risk

Fixed working capital missive of the alphabet is a origin of wealth. However, it is besides a origin of risk. This is because it causes:

1. Depreciation of fixed assets.
2. Outflow of involvement cost.
3. Normal repairs together with maintenances.
4. Contingencies together with uncertainties attached to the business.

9. Source of profit

Profit is the divergence betwixt sale toll together with cost of purchase.

Fixed assets are besides sources of profit. These assets aid inward earning profits through the sale of products.

However, fixed assets cannot earn a profits yesteryear themselves. They accept aid of next factors of production to earn the profit:

1. Raw-materials.
2. Labour.
3. Infrastructure facilities roofing render of electricity, fuel, water, etc.

10. Appreciation together with depreciation

The pregnant of 2 terms viz., appreciation together with depreciation are reverse to each other. Their private pregnant is stated below.

1. Appreciation way an growth inward the value of an property beingness used.
2. Depreciation indicates a decrease inward the value of an property beingness used.

Fixed assets tin undergo either an appreciation or depreciation over a catamenia of time. The value (price) of to a greater extent than or less fixed assets similar dry reason appreciate subsequently to a greater extent than or less catamenia of time. However, the value of other fixed assets such equally building, machinery, furniture, etc., depreciate subsequently to a greater extent than or less catamenia of time.

11. Miscellaneous features

Miscellaneous features of fixed working capital missive of the alphabet are equally follows:

• Fixed working capital missive of the alphabet improves fiscal analysis.
• It provides a long-term concern stability.
• It helps inward getting term loans.
• It besides improves equity working capital missive of the alphabet ratio.